Office market top-7 1Q2017

Best start for many years

Press release | Hamburg

Year on year take-up of office space in Germany’s top 7 property markets rose by some 16% in the 1st quarter of 2017. A total of 923,600 m² of office space in Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich was let or handed to an owner-occupier. This emerged from figures compiled by German Property Partners (GPP). The proportion of owner-occupier transactions almost doubled, to 15%. “Hamburg, Berlin, Düsseldorf and Munich kicked off the new year with better results than any during the past five to ten years,” says GPP spokesman Björn Holzwarth commenting on office take-up in the top 7 locations.
Take-up of space: Hamburg is a hot spot
With an increase of 60%, Hamburg posted by far the biggest growth in take-up of office space in any of the top 7 cities. The office space market saw similar good growth in Munich (+25%), Stuttgart (+22%) and Düsseldorf (+21%), whereas there was practically no change in Berlin (+1%). German Property Partners recorded declining figures only in Frankfurt (-2%) and Cologne (-20%).
Hamburg’s office take-up figure of 160,000 m² was the best year-opening result seen for the past ten years. This was attributable to five agreements for more than 5,000 m² of space each, compared with only two such contracts in the same period a year before. The interim lease for 19,700 m² of office space at Überseering 35 in City North was the biggest agreement signed in the 1st quarter.
Munich too, presented the best 1st-quarter result in recent years with a total of 237,000 m². In this case, three rental agreements for premises measuring more than 10,000 m² played a crucial role. The Deutsche Pfandbriefbank took 14,000 m² of space at Parkring 28-32 in Garching, Publicis Pixelpark chose 13,000 m² at Rosenheimer Strasse 143 a-d and the Bavarian State Capital Munich rented 12,000 m² at Denisstrasse 2.
Top known agreements for 10,000 m² or more | top 7 locations | Q1, 2017
City Project/property Tenant/owner-occupier Rented space (m²)
STU Fasanenweg, Leinfelden-Echterdingen Daimler AG (owner-occupier) about 50,000
BER Puschkinallee 52, Treptow Bundesanstalt für Immobilienaufgaben (Federal real estate) (owner-occupier)  about 47,000
DUS Hansaallee 1-3 HSBC Transaction Services  about 22,000
HAM Überseering 35  University of Hamburg  about 19,700
MUC Parkring 28-32, Garching Deutsche Pfandbriefbank about 14,000
MUC Rosenheimer Strasse 143 a-d Publicis Pixelpark  about 13,000
DUS Schwannstraße 10 Bankhaus Lampe about 13,000
MUC Denisstrasse 2 Bavarian state capital Munich about 12,000
The owner-occupier agreement signed by Daimler for 50,000 m² (Fasanenweg, Leinfelden-Echterdingen) lifted office take-up in Stuttgart to a total of 74,500 m². Apart from this contract, however, the biggest so far in any of the top 7 cities, business was quiet in Stuttgart with a letting total of 24,500 m².
Take-up of space in Düsseldorf totalled 102,800 m², the city’s best 1st-quarter result in five years and thus well above the five-year average of 79,800 m². The rental agreement signed by HSBC Transaction Services for 22,000 m² in a new build at Hansaallee 1-3 was a key contribution to the total.
Although there was only minimal growth in the take-up of office space, the year’s opening result of 172,000 m² was the best Berlin has seen in the past ten years. A huge 27% of this total (47,000 m²) was attributable to the sale of the old Vattenfall headquarters at Puschkinallee 52 which the Federal real estate corporation, Bundesanstalt für Immobilienaufgaben (BIMA), purchased for its own use.
Unlike the situation in previous years, no agreements for over 10,000 m² were signed in Frankfurt in the 1st quarter. Despite that, take-up of office space in this metropolis on the Main slipped only a little, to 125,300 m². Lettings were especially brisk in the 2,000 to 5,000 m² sector, where nine agreements totalled about 30,000 m², and in the 5,000 to 10,000 m² category, where twice as many transactions were recorded year on year, resulting in a 75% increase in take-up.
The steepest drop in the take-up of office space was reported in Cologne, falling from a particularly high base in the 1st quarter of 2016 to 52,000 m² this year. The biggest agreement to date was a let to Lufthansa, which took 6,500 m² of space on Linnicher Strasse while waiting to move into 4,600 m² in ONE COLOGNE, now being refurbished at Venloer Strasse 151-153.
Rents: Persistently trending up
The average rent for office space rose in all top 7 locations, with the steepest increases in Berlin (+7%) and Düsseldorf (+6%). Both Stuttgart and Cologne reported growth rates of 5%, Frankfurt, Munich and Hamburg posted +3% each. Traditionally, the highest average monthly rents have been charged in Frankfurt (€18.00/m²/month) and Munich (€16.50/m²/month). However, Berlin’s figure has climbed to €16.20/m²/month and is thus almost level with Munich’s rate.
The trends for the premium rent were far less uniform. In Frankfurt the top rates fell by 1% due to the low volume of agreements for expensive space in top properties, although the new figure of €38.00/m²/month is still higher than in the other six cities. These posted rises of between +1% (Cologne) and +14% (Munich, Berlin). Apart from Frankfurt, only one other city has top rents higher than €30/m²/month and that is Munich with a level of €34.40/m²/month. In the other five locations the premium rents varied between €21.50/m²/month (Cologne) and €28/m²/month (Berlin).
Vacant space: Dramatic shrinkage
The amount of office space available at short notice in the top 7 cities shrank by 15% in the 1st quarter, falling to 4.6m m². The reserve of available space was 5.1% relative to a total pool of office space of 90.59m m².
Apart from Düsseldorf, where the amount of available office space increased by 3%, all other locations registered shrinking stocks of vacant space, dramatically so in most cases. Munich, Berlin and Cologne posted a drop in vacant space of more than 20%, in Frankfurt and Stuttgart more than 10% less space stood empty.
The lowest vacancy rates among the top 7 cities were found in Stuttgart (3.0%), Berlin (3.2%) and Munich (3.5%), the highest in Düsseldorf (9.7%) and Frankfurt (10.3%). For all top 7 locations the volume of completions in 2017 and 2018 is set to total 2.18m m² of office space. Construction activity is centred in Berlin (464,000 m²) and Hamburg (439,000 m²). “In Stuttgart’s city district there are only two new builds under construction for a total of 11,000 m²”, says Holzwarth giving an example of the situation elsewhere.
“According to the ifo Institute the business mood is steadily improving. But, thanks to an unknown number of refugees who will try to join the workforce in coming months and job cuts announced by some big German companies, no-one can be really sure about how the labour market might change in 2017. So far demand for office space remains high - especially modern new-build premises - and we know that various clients are looking for large amounts of space. We therefore estimate a total take-up of office space of 3.55 million square metres in 2017,” forecasts Holzwarth. “In view of the mismatch between supply and demand in the new build sector the situation could easily change. The likely result is a further rise in rents, both average and premium.”
Top 7 locations | Q1, 2017
Take-up of space
in m²
160,000 172,000 102,800 52,000 125,300 74,500 237,000 923,600
against prior yr in %
+60 +1 +21 -20 -2 +22 +25 +16
Premium rent
in €/m²/month
26.50 28.00 26.50 21.50 38.00 23.00 34.40 -
Average rent
in €/m²/month
15.00 16.20 14.20 13.00 18.00 13.90 16.50 -
Stock of office space in millions m² 13.55 19.17 7.62 7.80 11.67 7.80 22.99 90.59
in m²
671,000 620,000 740,000 350,000 1,203,800 231,000 798,000 4,613,800
Vacancy rate
in %
5.0 3.2 9.7 4.5 10.3 3.0 3.5 5.1
2017 + 2018 in m²
439,000 464,000 220,000 200,000 261,000 290,100 305,000 2,179,100

Source: German Property Partners

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