In the 1st half of 2017 25% more space was let or taken up by owner-occupiers than in the same period of 2016. The brisk rate of take-up seen in the 1st quarter continued in the 2nd. Figures from Grossmann & Berger, a member of German Property Partners
(GPP), show that Hamburg posted a new record result with office take-up of some 300,000 m². Accounting for around 8% or 25,000 m², owner-occupiers made only a minor contribution to the good overall result. “The new best mark for a half year reflects market growth. In view of the fact that various larger companies are currently seeking new locations in Hamburg as soon as possible, it would seem that a year-end total of 600,000 square metres is within reach,” comments Andreas Rehberg
, managing director of Grossmann & Berger.
Large premises accounted for about 30 percent of turnover
Users who required 5,000 m² or more were responsible for about 30% of total take-up of space in the 1st half year. In the 2nd quarter Olympus Deutschland signed the largest agreement thus far in the 1st half year, taking 34,500 m² of office space. A tailor-made complex is currently being built for the company, which describes itself as a leading manufacturer and vendor of opto-digital devices, located in City South (Wendenstrasse 14-18) the offices will probably be ready in 2020. Because in order to build the new company headquarters with a total floor area of 55,000 m² the buildings that were in use have to be demolished, employees are obliged to move into the nearby “Poseidonhaus” (Amsinckstrasse 63-71d) for the interim. The remaining five of the six agreements for office premises offering 5,000 m² or more were completed in the 1st quarter. New tenants include the University of Hamburg which has taken 19,700 m² in City North (Überseering 35); in August the humanities and arts institutes will move in for as long as it takes to refurbish the “Philosophenturm” (Philosophers’ Tower) on the university campus.
The total of 330 rental agreements and owner-occupier contracts in the first two quarters was exactly equal to the number of transactions in the prior year. The next-biggest segment of the market, with a share of 21% of take-up, was the 1,001 to 2,000 m² size category. The third most popular size was 501 to 1,000 m², which accounted for 19% of take-up. Fourth place went to the segment between 2,001 and 5,000 m², accounting for 18%. The latter size category included the construction start of a new Parish Centre on Max-Zelck-Strasse in Niendorf district (Hamburg West). The new administrative offices of the church district of Hamburg-West/South Holstein will accommodate about 200 employees and have a total floor area of some 7,300 m². It is estimated that about 4,000 m² of this will be used as office space.
City South overtakes City as most popular sub-market
At the end of the first half year City South
emerged as the dominant sub-market, ousting City from the top slot. Take-up of space in City South added up to 84,900 m² or about 28% of the total. Apart from the previously mentioned Olympus lease for 34,500 m² in the 2nd quarter, the good result was driven by a number of agreements for large premises signed in the 1st quarter, such as the two contracts with the Ministry of Schools and Vocational Training for some 8,400 m² (Amsinckstrasse 28) and for 6,400 m² (Amsinckstrasse 34).
, office lets totalled 64,800 m² i.e. 20,000 m² less than in the office district of City South. Thus what has traditionally been the most popular sub-market accounted for 22% to place second at the end of the 1st half year. The biggest agreement in the City in the 1st half year was signed in the 1st quarter by WeWork, a global provider of coworking space, for some 7,800 m² in the “Hanseforum” (Axel-Springer-Platz 3). In the 2nd quarter another business centre operator, Regus, signed the second-largest agreement, taking 3,400 m² of space in the “Work Life Center” (Gorch-Fock-Wall 1a).
The third-biggest sub-market in the 1st half of the year was City North
, with a share of 11%. Around 32,100m² of office space was let during this period. The good result for this sub-market stemmed, in addition to the 1st-quarter contracts with the University of Hamburg (Überseering 35), with ERGO life insurance and the fitness studio beneFit (both in the “Silberling”, Überseering 32-34), from two agreements in the 2nd quarter for space in the “Ü8” (Überseering 8) - signed by Regus Business Center and akquinet AG (extension of premises).
Olympus puts manufacturing sector ahead
Thanks to the large amount of space let to Olympus, almost a fifth of total take-up (57,600 m² or 19%) was attributable to companies in the manufacturing sector. Consultancy firms, traditionally avid seekers of new space, ranked in second place, with 16% (48,000 m²). The biggest agreement signed by a consultancy was for about 5,700 m² in the “Bieber-Haus”, Heidi-Kabel-Platz 2 (St. Georg), which was let to Publicis Pixelpark. Public administration, federations and social facilities came third, with about 11% (33,000 m²). This year on year increase in take-up was the result of, e.g., the previously mentioned owner-occupier project by the church district Hamburg-West/South Holstein and new lets such as the contracts with the Ministry of Schools and Vocational Training (described earlier) for space in City South, with the Federal Employment Agency (2,800 m² in “Channel Hamburg”, Harburg) and the Central Customs Office (1,800 m², Heidenkampsweg 96-98, City South). Construction and property management firms followed in fourth place, taking about 16% (48,000 m²) of the total. The biggest lets to members of this sector of industry were to the business centre operators WeWork (7,800 m²) and Regus (3,400 m²). “The great demand for business centres offering a wide range of services shows that there is an increasing need in Hamburg for flexible office space and that the ways in which work and business are organized are becoming more diverse”, says Rehberg
, commenting on the trend.
Premium rent rises by more than eight percent
By the end of the 1st half of 2017 the premium rent (prices paid in the most expensive 3% of newly let space in the past twelve months) had risen year on year by 8.2% from €24.50 to its current level of €26.50/m²/month. At the same time the average rent, weighted by space occupied, fell slightly from €14.90 to €14.80/m²/month, whereas the rate in the prior quarter was €15.00/m²/month. “The dramatic reduction of empty space has changed the market. The scarcity of offices will, in the shorter term, mean higher rents. Moreover, the landlords will be adjusting their incentive packages, which used to be very generous, to reflect the new situation on the market,” says Rehberg
, commenting the changes in rates.
Vacancy rate falls below five percent for first time in ten years
For the first time in ten years the vacancy rate in Hamburg fell below the 5% mark. By the end of the 1st half year the vacancy rate in Hamburg, including sub-let space, had fallen to 4.9% from 5.4% in the same period a year before. Only 666,700 m² of office space was available at short notice. “Even if a majority of users are unwilling to face the reality, we have to regard a vacancy rate of less than 5 per cent as denoting a shortage of space. There are practically no small office suites of less than 250 square metres left on the market. And even for larger suites, the situation is becoming critical. In some cases, we now see three or more potential tenants negotiating on one and the same property,” says Rehberg
, describing how acute the position now is.
The volume of completions in Hamburg is set to reach a high of 277,000 m² in 2017. However, less than 40% of this total will go on the market as speculative space. Scheduled office completions in 2018 total around 141,000 m². Of this amount around 52% is still available. Building this year and next is concentrated in the City sub-market. “117,200 square metres of office space are in the pipeline here. Projects include major developments such as the “Stadthöfe” and “Alter Wall” where the vast majority of space is already off the market,” says Rehberg
“In view of great demand from potential tenants in conjunction with a shortage of empty space and the small proportion of speculative space in new developments, tensions on the office market are slowly becoming apparent. Project developers should take this market opportunity to build more on speculation. Many tenants, including those who need large premises, are already signing to secure space that they cannot move into until two or three years hence. As far as take-up of space is concerned, we expect brisk business in the second half year, possibly exceeding the amount posted a year ago,” forecasts Rehberg
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Source graphic: Grossmann & Berger GmbH