Office market top-7 2Q2016
Strong half year ends 11 per cent up
Press release
| Hamburg
04.07.2016
By the end of the first half year, as figures from German Property Partners (GPP) show, some 11% more office space had been taken up in Germany’s top 7 cities. Overall, take-up of office space totalled 1.65m m², of which some 852,000 m² relates to turnover in the 2nd quarter. “This good result is a hopeful sign that the letting market will be as brisk in the second half of the year. Uncertainty about the effects of Brexit is the only cloud on the office market horizon,” says Björn Holzwarth, spokesman for German Property Partners.
Take-up of space: Cologne up by fifty per cent
The greatest surge was in Cologne, where a 51.9% increase in take-up of office space was posted (to 205,000 m²). This was attributable to the Zurich insurance company’s decision to rent 60,000 m² of space. “The agreement was also the starting signal for the “MesseCity”. This new development will enhance the position of Deutz, a district on the right bank of the Rhine, on the office property market,” says Holzwarth.
In terms of absolute take-up of space, Munich was again the leading city with turnover of 395,000 m² and year on year growth of 32%. An above-average number of public authorities required large suites of offices (Hofmannstrasse 61-63: 15,200 m², Werinherstrasse 83-89: 14,900 m²) in the 2nd quarter, which had an appreciable effect on total turnover.
Known agreements for 10,000 m² or more, top 7 locations Q1-2, 2016
Take-up of space rose by 20.5% in Frankfurt to 235,900 m². The majority of leases were for mid-sized properties. This category includes the largest new lease in the 2nd quarter, signed by Union Investment for 7,800 m² of office space (Neue Mainzer Strasse 14-18).
With an increase of 2% to 305,000 m², Berlin returned a result that was even better than in the same period of 2015, a record year on the office market. This owed much to the biggest rental agreement signed in the 2nd quarter in Berlin, when the State Office for Migrant Affairs (LAF) chose 17,700 m² of space at Darwinstrasse 18.
The result for Düsseldorf was almost as good as in the prior year, dropping 2.4% to 165,000 m² of office space. To accommodate their headquarters, Douglas Holding signed the largest lease in this period, taking 8,600 m² of space in the “DUO” development project (Hans-Günther-Sohl-Strasse 5-11).
In Stuttgart 109,000 m² office space was taken up, 25.9% less than in the prior year. No agreements were recorded in the 4,000 to 9,000 m² size segment and so far no owner-occupier contracts have been concluded.
Due to the absence of agreements for large amounts of space, Hamburg’s result contracted by 4.4% to 240,000 m². The biggest rental agreement to date was concluded in the 2nd quarter when Axa, an insurance firm, signed for 9,750 m² of space in the “Fleet Offices”, Heidenkampsweg 74+76.
“Both in Stuttgart and in Hamburg, several large-scale leases are at the negotiation phase. We therefore expect appreciably more letting activity in these two cities in the second half of the year,” says Holzwarth.
Rents: Pushed up by shortage of space
In terms of both premium and average rents, the highest rates for office space were posted in Frankfurt (€38.00 and €17.50/m²/month respectively) and Munich (€34.50 and €16.00/m²/month). The steepest rise in average rents was the 26.2% seen in Cologne, where the new figure is €15.40/m²/month. This is attributable to the big lease signed by Zurich Versicherung and to other sizeable rental agreements for expensive properties. The premium rent in Berlin soared 11.1% to €25.00/m²/month, the sharpest rise in any of the 7.
“Rents are rising in almost every top 7 location. This is because less space is available. If the fit-out and micro-location are right, tenants are increasingly willing to pay rents over 20 euros/m² for properties in central locations,” says Holzwarth.
Vacancies: Remaining at an all-time low
During the first six months the total vacancy rate for offices in Germany’s top 7 cities saw another year on year drop of 0.5% to 5.8%. “With vacancy rates hitting 3.3% in Stuttgart, 3.9% in Munich and 4.1% in Berlin, it is certainly no exaggeration to speak of all-time lows. The continuing dearth of new construction and constant demand for offices are putting added pressure on rents in the top 7 cities,” explains Holzwarth. GPP’s unaltered expectations for the years 2016 and 2017 are 214 project completions delivering some 2.05m m² of office space. New-build activity is strongest in Hamburg, followed by Berlin, where 466,000 m² and 330,000 m² respectively are in the pipeline.
Outlook: Second half of 2016
The good results for the first half year indicate that take-up of office space in the top 7 cities will be very high over the next half year. It is hard to predict whether individual locations will equal their records from the prior year. Apart from the unforeseeable consequences of Brexit, the economic climate in Germany is good for the real estate industry. “Frankfurt could become a considerably more important centre of European banking and stock market activity. Even though the UK has not yet formally declared its desire to leave, the Frankfurt office market could see some overreaction as a number of companies would like to secure large, contiguous suites of offices on favourable terms,” forecasts Holzwarth.
Germany’s top 7 office locations, Q1-2 2016
Source: German Property Partners
The greatest surge was in Cologne, where a 51.9% increase in take-up of office space was posted (to 205,000 m²). This was attributable to the Zurich insurance company’s decision to rent 60,000 m² of space. “The agreement was also the starting signal for the “MesseCity”. This new development will enhance the position of Deutz, a district on the right bank of the Rhine, on the office property market,” says Holzwarth.
In terms of absolute take-up of space, Munich was again the leading city with turnover of 395,000 m² and year on year growth of 32%. An above-average number of public authorities required large suites of offices (Hofmannstrasse 61-63: 15,200 m², Werinherstrasse 83-89: 14,900 m²) in the 2nd quarter, which had an appreciable effect on total turnover.
Known agreements for 10,000 m² or more, top 7 locations Q1-2, 2016
| City | Project/property | Tenant/owner-occupier | Rented space (m²) |
| CGN | “MesseCity” (Cologne-Deutz) | Zurich Versicherung (insurance) | 60,000 |
| BER | Mauerstrasse 28 | Federal Ministry for Health (owner-occupier) | 27,000 |
| FFM | “Japan Center”, Taunustor 2 | European Central Bank (ECB) | 17,800 |
| BER | Darwinstrasse 18 | State Office for Migrant Affairs (LAF) | 17,700 |
| MUC | Hofmannstrasse 61-63 | Bavarian State Capital Munich | 15,200 |
| MUC | Werinherstrasse 83-89 | Institute for Federal Real Estate Bavaria | 14,900 |
| STU | Ruppmannstrasse, Schockenriedstrasse | Trelleborg Sealing Solutions Germany | 13,700 |
| MUC | Semmelweisstrasse | MorphoSys | 13,500 |
| CGN | Ottoplatz (Cologne-Deutz) | Cologne Municipality Facility Management | 13,000 |
Take-up of space rose by 20.5% in Frankfurt to 235,900 m². The majority of leases were for mid-sized properties. This category includes the largest new lease in the 2nd quarter, signed by Union Investment for 7,800 m² of office space (Neue Mainzer Strasse 14-18).
With an increase of 2% to 305,000 m², Berlin returned a result that was even better than in the same period of 2015, a record year on the office market. This owed much to the biggest rental agreement signed in the 2nd quarter in Berlin, when the State Office for Migrant Affairs (LAF) chose 17,700 m² of space at Darwinstrasse 18.
The result for Düsseldorf was almost as good as in the prior year, dropping 2.4% to 165,000 m² of office space. To accommodate their headquarters, Douglas Holding signed the largest lease in this period, taking 8,600 m² of space in the “DUO” development project (Hans-Günther-Sohl-Strasse 5-11).
In Stuttgart 109,000 m² office space was taken up, 25.9% less than in the prior year. No agreements were recorded in the 4,000 to 9,000 m² size segment and so far no owner-occupier contracts have been concluded.
Due to the absence of agreements for large amounts of space, Hamburg’s result contracted by 4.4% to 240,000 m². The biggest rental agreement to date was concluded in the 2nd quarter when Axa, an insurance firm, signed for 9,750 m² of space in the “Fleet Offices”, Heidenkampsweg 74+76.
“Both in Stuttgart and in Hamburg, several large-scale leases are at the negotiation phase. We therefore expect appreciably more letting activity in these two cities in the second half of the year,” says Holzwarth.
Rents: Pushed up by shortage of space
In terms of both premium and average rents, the highest rates for office space were posted in Frankfurt (€38.00 and €17.50/m²/month respectively) and Munich (€34.50 and €16.00/m²/month). The steepest rise in average rents was the 26.2% seen in Cologne, where the new figure is €15.40/m²/month. This is attributable to the big lease signed by Zurich Versicherung and to other sizeable rental agreements for expensive properties. The premium rent in Berlin soared 11.1% to €25.00/m²/month, the sharpest rise in any of the 7.
“Rents are rising in almost every top 7 location. This is because less space is available. If the fit-out and micro-location are right, tenants are increasingly willing to pay rents over 20 euros/m² for properties in central locations,” says Holzwarth.
Vacancies: Remaining at an all-time low
During the first six months the total vacancy rate for offices in Germany’s top 7 cities saw another year on year drop of 0.5% to 5.8%. “With vacancy rates hitting 3.3% in Stuttgart, 3.9% in Munich and 4.1% in Berlin, it is certainly no exaggeration to speak of all-time lows. The continuing dearth of new construction and constant demand for offices are putting added pressure on rents in the top 7 cities,” explains Holzwarth. GPP’s unaltered expectations for the years 2016 and 2017 are 214 project completions delivering some 2.05m m² of office space. New-build activity is strongest in Hamburg, followed by Berlin, where 466,000 m² and 330,000 m² respectively are in the pipeline.
Outlook: Second half of 2016
The good results for the first half year indicate that take-up of office space in the top 7 cities will be very high over the next half year. It is hard to predict whether individual locations will equal their records from the prior year. Apart from the unforeseeable consequences of Brexit, the economic climate in Germany is good for the real estate industry. “Frankfurt could become a considerably more important centre of European banking and stock market activity. Even though the UK has not yet formally declared its desire to leave, the Frankfurt office market could see some overreaction as a number of companies would like to secure large, contiguous suites of offices on favourable terms,” forecasts Holzwarth.
Germany’s top 7 office locations, Q1-2 2016
| HAM | BER | DUS | CGN | FFM | STU | MUC | |
| Space take-up in m² | 240,000 | 305,000 | 165,000 | 205,000 | 235,900 | 109,000 | 393,500 |
| Premium rent in €/m²/month | 24.50 | 25.00 | 26.50 | 21.25 | 38.00 | 22.80 | 34.45 |
| Average rent in €/m²/month | 14.90 | 15.50 | 13.80 | 15.40 | 17.50 | 12.80 | 16.00 |
| Stock of office space in millions m² | 13.43 | 19.02 | 7.60 | 7.80 | 11.60 | 7.67 | 22.90 |
| Vacant space in m² | 723,400 | 780,000 | 762,000 | 430,000 | 1,378,900 | 252,000 | 895,600 |
| Vacancy rate in % | 5.4 | 4.1 | 10.0 | 5.5 | 11.9 | 3.3 | 3.9 |
Source: German Property Partners
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