Office market top-7 1Q2018

The new year starts in fine form


Press release | Hamburg
03.04.2018


The office-letting market has retained its vibrancy in 2018. In the 1st quarter a total of 850,200 m² of office space was taken up in Germany’s top 7 cities - Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich. Take-up of office space thus slipped by 8 % compared with the exceptionally high figures registered at the start of 2017. This emerged from figures compiled by German Property Partners (GPP). At the same time the amount of space standing empty reached a new record low of 3.9 %. GPP spokesperson Guido Nabben comments that, “It was certainly not due to a lack of demand that slightly less office space was taken up in the first quarter of 2018. And despite the ever growing shortage of available space and rising rents, Frankfurt, Stuttgart, Berlin and Cologne actually improved on their prior year results.”
 
Take-up of space: Shortate is becoming noticeable
In the 1st quarter of 2018 Frankfurt posted higher growth than any other of the top 7 cities. Year on year the take-up of office space rose by 23 % to total 154,400 m². A significant part of this result was attributable to the 24,000 m² taken by the Frankfurter Allgemeine Zeitung, a daily newspaper, in a new build development in the Europaviertel district. Smaller lets for less than 1,000 m² collectively accounted for 40 % of the total take-up of office space. With a share of one third, the mid-sized segment fell slightly below the prior year’s level, although demand remained brisk.
 
Stuttgart posted the second-biggest increase in the 1st quarter. Year on year, take-up of office space grew by 22 % to 91,000 m². Essentially, this resulted from two large owner-occupier transactions which made up around two-thirds of total turnover. One involved Robert Bosch GmbH, for whom construction started on several buildings in Stuttgart-Feuerbach to provide some 50,000 m² of office space, and the other concerned the state government of Baden-Württemberg, which purchased a building offering about 10,800 m² of offices at Kriegsbergstrasse 32.
 
The year started well in Berlin too, and, despite the limited amount of available space, take-up totalled 185,000 m² of office space, or some 8 % more than a year ago. Much of this total was due to seven transactions for over 5,000 m² of space each; in fact, four of these agreements were for more than 10,000 m² of office space. One of the biggest transactions in this category was the 12,000 m² of office space which utility company Gasag is renting in a new build on the “Euref Campus”. As in 2017, providers of co-working and business centre concepts comprised a significant group of clients.
 
In Cologne too, all the signs pointed to growth. In the 1st quarter 55,000 m² of office space was newly taken up – 6 % more than in the same period a year before. The biggest agreement was the rental of 6,000 m² of office space at Edmund-Rumpler-Strasse 5 by recycling company Duales System Holding (the “green dot”).
 
With total take-up of 191,500 m², Munich did not quite match its extremely good result in the 1st quarter of 2017. The year-on-year decline of 19% was largely due to an acute shortage of office property that is growing dramatically worse. Nevertheless, there was a brisk market for large office suites in Munich. Deutsche Postbank, a bank, rented some 16,900 m² of office space at Werinherstrasse 83-95 and the telecom company M-net signed a rental agreement for 10,000 m² of space at Frankfurter Ring 158.
 
The growing shortage of space was felt in Hamburg too. Compared with the record result returned in the 1st quarter of 2017, take-up of office space dropped by 34 % to 105,000 m². The most popular sub-markets City and City South saw especially large year-on-year falls of 28 % and 43 % respectively. The largest reported agreement was for 10,000 m² of office space in the Vattenfall building at Überseering 12 (City North) which Signal Iduna has rented as an interim solution.
 
Düsseldorf likewise reported a year on year drop of 34 % compared with the exceptional result of the same quarter last year. This city on the Rhine posted figures slightly above those for 2016 at 68,300 m². Co-working and business centre providers accounted for about 18 % of take-up in the 1st quarter. This sector also signed the largest agreement noted in the first three months of the year. Regus Spaces has rented 6,000 m² of office space at Breite Strasse 3-5.
 
Rents: Huge rise in average rents
During the 1st quarter of 2018 all top 7 cities noted a rise in the average rents for office space. Berlin (+23 %), Frankfurt (+14 %) and Munich (+ 10%) posted two-figure increases due to a number of agreements for large amounts of space taken from a steadily shrinking pool. Düsseldorf posted a marked increase in average rents of 8 %. The increases were more moderate in Stuttgart (+5 %), Hamburg (+4 %) and Cologne (+ 2%). Once again, the highest average rent was paid in Frankfurt at €20.60/m²/month. However, Berlin has now almost closed the gap (€20.00/m²/month) and has overtaken Munich (€18.00/m²/month).
 
In terms of premium rents, Berlin posted the biggest year-on-year increase of 11 %. The top level in the national capital has now reached €31.00/m²/month, thus topping the €30.00/m²/month mark for the first time since the 1990s. The premium rent grew by 9 % in Frankfurt, reaching a new record high of €41.50/m²/month. In Hamburg, by contrast, the top rents softened by 2 % from a high base to €26.00/m²/month. The premium rents in the other four cities ranged from €21.75/m²/month (Cologne) to €34.90/m²/month (Munich) and growth rates were between 1 % (Cologne, Munich) and 4 % (Stuttgart).
 
Vacant space: Available space reaches critical level
With the stock of office space totalling 90.6m m² at the end of the 1st quarter of 2018, the reserve of available space in the top 7 cities was a mere 3.5m m². The vacancy rate fell a further 4.1 % from its level at the end of 2017 to a new record low of 3.9 %.
 
The highest vacancy rates are to be found in Frankfurt, at 8.6 %, and Düsseldorf at 8.2 %. All the other cities have reached extremely low levels of between 4.2 % (Hamburg) and 2.1 % (Berlin, Stuttgart). The buildings scheduled for completion this year and next promise to expand the pool of office space by 2.5m m². However, it is to be assumed that a considerable proportion of this space has been pre-let.
 
Outlook
“The situation at the end of the first quarter points to another good year. The economic conditions suggest that demand will remain brisk. GPP estimates that this year’s office take-up will total some 3.6 million square metres,” concludes Nabben. “However, as the property market nears a state of being fully let, it will not be possible to match the record of 2017. The dearth of available properties considerably reduces the possible number of large lets. In Munich clients seeking large amounts of space have little option but to sign for offices that have not yet been built. Düsseldorf is the only city that might top its 2017 result, as the vacancy rate here is still at a reasonable level and some clients are in the market for large amounts of space. The imbalance between supply and demand in the top 7 cities will most probably lead to further rent increases.”
 
Top 10 known agreements | top 7 locations | Q1, 2018
City Project/property Tenant/owner-occupier Rental area
(ca. m²)
STU Bludenzer/Steiermärker Strasse (dev. project) Robert Bosch GmbH (owner-occupier, construction start) 50,000
FFM Europaallee 92 (dev. project) Frankfurter Allgemeine Zeitung (FAZ) 24,000
MUC Werinherstrasse 83-95 Deutsche Postbank AG 16,900
BER Euref-Campus 23-24 (dev. project) GASAG AG 12,000
STU Kriegsbergstrasse 32 State government of Baden-Württemberg (bought by occupier) 10,800
HAM Überseering 12 Signal Iduna Gruppe 10,000
MUC Frankfurter Ring 158 M-net Telekommunikations GmbH 10,000
FFM T8, Taunusanlage 8 FM Insurance Company Limited 6,600
FFM Marienforum, Mainzer Landstrasse 1 Bethmann Bank AG 6,480
CGN Edmund-Rumpler-Strasse 5 DSD Duales System Holding GmbH & Co. KG (“green dot”) 6,000
DUS 3hoch5, Breite Strasse 3-5 Regus Spaces 6,000
Source: German Property Partners (GPP)

 
Top 7 locations | Q1, 2018
  HAM BER DUS CGN FFM STU MUC Top 7
Take-up of space
in m²
105,000 185,000 68,300 55,000 154,400 91,000 191,500 850,200
Change
against prior yr in %
-34 +8 -34 +6 +23 +22 -19 -8
Premium rent
in €/m²/month
26.00 31.00 27.00 21.75 41.50 23.90 34.90 -
Average rent in €/m²/month 15.60 20.00 15.40 13.20 20.60 14.60 18.10 -
Stock of office space in millions m² 13.64 19.20 7.45 7.80 11.63 7.88 23.03 90.62
Vacancies
in m²
573,700 410,000 610,000 265,000 1,002,100 168,000 520,000 3,548,800
Vacancy rate
in %
4.2 2.1 8.2 3.4 8.6 2.1 2.3 3.9
Completions 2018 + 2019 in m² 327,000 711,000 201,000 230,000 349,000 215,000 500,000 2,533,000
Source: German Property Partners (GPP)

Press contact

Visitenkarte Xing
Britt Finke


Bleichenbrücke 9
20354 Hamburg

b.finke@grossmann-berger.de

040-350 802 993
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