Office Hamburg 1Q2017

60 % increase, best 1st quarter for the past ten years

Press release | Hamburg

The office-letting market in Hamburg started the year in exceedingly promising manner. The 1st quarter showed a year on year increase of 60%. Grossmann & Berger, a member of German Property Partners (GPP), calculates that take-up of office space totalled 160,000 m². Owner-occupiers made a below-average contribution to this excellent result by taking only 7,000 m², which translates into a share of 4%. “In none of the past ten years have we seen the year start so well in Hamburg. A noteworthy feature of the first quarter was the relatively large number, five in all, of agreements for over 5,000 square metres of space,” says Andreas Rehberg, managing director of Grossmann & Berger.
More than twice as many large properties taken
Year on year the biggest increase in take-up was noted for the largest size category, whose share rose to 30% (48,000 m²). In the 1st quarter five agreements were signed for premises sized 5,000 m² or more, compared with two the year before. The largest contract was concluded by the University of Hamburg to rent 19,700 m² in City North (Überseering 35). From August this year the university will be housing its humanities and arts institutes there for three to five years. This temporary arrangement is because the “Philosophenturm” (Philosopher’s Tower) that has stood on the university campus at Von-Melle-Park for over 50 years is to be refurbished for €60m.
In addition to the university, another municipal institution leased two large properties. The Ministry of Schools and Vocational Training rented some 8,400 m² at Amsinckstrasse 28 and some 6,400 m² at Amsinckstrasse 34 (both City South) for the duration of refurbishment work at their Mundsburg offices on Hamburger Strasse. These two agreements constituted the second and fourth-largest to date. “In Hamburg there are many older buildings that no longer meet the requirements of today’s users. When comprehensive refurbishment is planned, the tenants often have no alternative but to vacate the building. Because there is a shortage of empty space, these tenants should look for a large enough interim solution as soon as possible,” comments Rehberg.
The third-biggest agreement of the year was signed by WeWork for 7,800 m² in the “Hanseforum” (Axel-Springer-Platz 3, City). This supplier of co-working space operates throughout the world and intends to open at the new site in the course of this year. The fifth-biggest contract was for about 5,700 m² in the “Bieber-Haus”, Heidi-Kabel-Platz 2 (St. Georg). In mid-2018 a full service advertising agency will move into these comprehensively refurbished offices in an historic building.  
In the 1st quarter a total of 170 rental agreements and owner-occupier transactions were completed, 13% more than in the 1st quarter of 2016. After large office suites, the second most popular size was the 1,001 to 2,000 m² category, which accounted for 20% of take-up, followed by 18% in the 2,001 to 5,000 m² segment.
City North close on the heels of City South
In the 1st quarter 29,100 m² of office space was let in City North. This sub-market thus accounted for 18% of the total, taking third place behind City and City South. Contributors to the good result for this sub-market, apart from the large amount of space taken by the University of Hamburg, included owner-occupier ERGO life insurance which took 2,600 m² for its own use, and the fitness studio beneFit, which rented some 3,300 m². The latter two companies chose the “Silberling” block (Überseering 32-34).
City was the strongest sub-market in the 1st quarter, where total take-up of 44,000 m² of space represented a year on year increase of 50%. However, its share of take-up remained practically unchanged at 28%. 47% of agreements in the City were for premises bigger than 2,001 m². Apart from WeWork, the companies choosing new or additional space in the city centre included Serviceplan Gruppe, a specialist for advertising and communication (expansion, 2,900 m², “Elbhof”, Steinhöft 9), the law firm Hogan Lovells International (expansion, 2,800 m², Ballindamm 33) and a European business law firm (2,700 m², “Prien-Haus”, Jungfernstieg 51).
With take-up of space at 31,400 m² City South was the sub-market recording the second highest total. Compared with the 1st quarter of 2016 its share rose from 12% to 20%. The two previously mentioned agreements with the Ministry of Schools and Vocational Training accounted for 14,800 m² and thus almost half of the total. There were also six agreements for more than 1,001 m², for example the health and safety firm B A D Gesundheitsvorsorge und Sicherheitstechnik (1,200 m², Nagelsweg 37-39).
Consultants are biggest client group
In the 1st quarter of 2017 consultancies were the biggest group of clients for office space, whereas in the 1st quarter of 2016 the retail trade and gastronomy sector held this position. Altogether, consultancies accounted for 20% of the space taken up (32,300 m²). The large amounts of space taken by the University of Hamburg and the Ministry of Schools and Vocational Training meant that the education and public administration sector was the second-biggest group of new tenants. Education facilities accounted for a share of 15% (23,200 m²), public administration for 14% (21,600 m²).
Trend towards higher rents
Because empty space is in short supply and some of the available properties have been of superior quality, rents have risen further in recent months. “The good state of the economy is likely to ensure that this trend persists, especially where there is a shortage of large areas of contiguous space,” says Rehberg. Compared with the same quarter a year ago the average rent, weighted by area let, rose from €14.60 to €15.00/m²/month. The premium rent (prices paid in the most expensive 3% of newly let space in the past twelve months) has risen by 6% from €25.00 to €26.50/m²/month.
Vacant space stabilizes at low level
Within the past twelve months the amount of space available at short notice fell by 9% from 739,000 to 671,000 m². During the same period the vacancy rate fell from 5.5 to 5.0%. In the two most popular sub-markets, City and City South, vacancies declined by double-digit percentages - 22% (City) and 29% (City South). “Contiguous office suites of more than 5,000 square metres are practically unavailable at short notice in City or City South,” remarks Rehberg. “Contracts have already been signed for 56 per cent of the comparatively high volume of completions over the next two years, but this has done little to ease the pressure on the market.” 60 developments are planned for 2017 and 2018 with 439,000 m² of office space. The City sub-market is the area of greatest activity, where 22 developments are set to deliver some 128,000 m² of space.
Outlook 2017
“In view of the high number of completions and the lively demand for new build space we expect the good turnover of lets on the market for office space in Hamburg to continue. The result for the year will probably exceed the ten-year average of 505,000 m², considering that a third of this sum has already been posted in the first quarter,” says Rehberg.
The detailed market survey will be ready for download on our website shortly.

Source graphic: Grossmann & Berger GmbH

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