Office market top-7 3Q2016

Continued dynamism a good sign

Press release | Hamburg

Figures for the first nine months of 2016 now released by German Property Partners (GPP) show that in Germany’s top 7 property markets (Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich) some 2.67m m² of office space was newly let, 17% more than in the previous year. In the 3rd quarter the letting volume fell just short of a million square metres, at 972,400 m². “Six of the seven locations saw year on year take-up rising by percentages well in the double-digit range,” says Björn Holzwarth, spokesman for German Property Partners. “The high take-up figures reflect the desire of many companies to move into modern, efficient offices. A move is often a wise economic decision because rental costs can be reduced by ensuring space is used in optimal fashion and by negotiating realistic market terms and conditions, including incentive packages.”

Office market top-7 3Q2016Office market top-7 3Q2016
Take-up of space: Six locations show good growth
The take-up of space grew by double-digit figures in six of the seven cities, with Cologne leading the way (+48%), followed by Stuttgart (+40%), Frankfurt (+21%), Hamburg (+17%), Munich (+11%) and Berlin (+10%). Only Düsseldorf (-19%) failed to match the excellent result returned in the prior year.

The biggest-volume agreement was signed in Stuttgart. Daimler AG decided on a campus of its own on the Stuttgart-Vaihingen industrial estate, offering a total of about 75,000 m² of office space.

Top 10 known agreements | top 7 locations | Q1-3, 2016
City Project/property Tenant/owner-occupier Rented space(m²)
STU Industriestrasse Daimler AG (owner-occupier) 75,000
CGN MesseCity, Cologne-Deutz Zurich Versicherung (insurance) 60,000
BER Medien Campus, Schützenstrasse Axel Springer (owner-occupier) 40,000
BER Mauerstrasse 28 Federal Ministry for Health (owner-occupier) 27,000
HAM Poseidonhaus, Amsinckstrasse 63-71d Olympus Deutschland 23,800
STU Spiegelbergerstrasse Robert Bosch GmbH (owner-occupier) 20,000
CGN Butzweilerhof-Allee Bundesagentur für Arbeit (Federal Labour Agency) 19,500
FFM Japan Center, Taunustor 2 European Central Bank (ECB) 17,800
BER Darwinstrasse 18 State Office for Migrant Affairs (LAF) 16,800
MUC Hofmannstrasse 61-63 Federal Migration Office 15,200

In absolute terms, Munich attained the highest level of office take-up, its total of 550,000 m² representing a year on year rise of 11%. However, the speed at which premises were let slowed somewhat in comparison with the first two quarters. This was partly due to the “summer slump”, which had been expected, and partly to the fact that some of the larger agreements were postponed to the final quarter.

With an increase of 10% to 541,000 m², Berlin remains on track for an excellent result, and is even slightly ahead of where it stood at this point in the record-breaking year 2015. The biggest take-up of space registered in the first nine months was the building start for a media company, the “Axel Springer Medien Campus” (Schützenstrasse) which is to provide 40,000 m² of office space.

In Hamburg take-up rose by 17% and the excellent result of 415,000 m² owed much to three large agreements in the 3rd quarter. These included Olympus Deutschland’s temporary rental of 23,800 m² of office space at Poseidonhaus, Amsinckstrasse 63-71d and the rental agreement signed by KPMG in the Springer Quarter project (Caffamacherreihe/Kaiser-Wilhelm-Strasse) for 11,800 m².

Frankfurt improved its year on year take-up figures by 21% to 362,700 m². As in the 1st half of the year, leases were primarily for mid-sized properties and were numerous enough to compensate for the lack of large-scale lets. The biggest new contract in the 3rd quarter was that signed by Commerzbank, for 10,800 m² of office space at Theodor-Heuss-Allee 106.

By the end of the 3rd quarter Cologne had returned a record result of 310,000 m² of office space taken up, an increase of 48%. This is attributable to five agreements concluded for more than 12,000 m² each, including the 2nd-quarter let to Zurich Insurance (60,000 m² in Cologne-Deutz) and contracts signed by several public facilities.

The result for Stuttgart was 263,000 m² at the end of the 3rd quarter, a figure well above average and 40% higher than that seen in the year before. Whereas in the 1st half of the year no owner-occupier transactions were noted, the 3rd quarter saw two contracts for large amounts of space: Daimler decided upon its own Campus on the Vaihingen industrial estate offering a total of 75,000 m² and Robert Bosch opted for a new-build project in Zuffenhausen that will provide 20,000 m² of office space.

The reasons for the below-average take-up of space in Düsseldorf - the figure of 224,000 m² falls 19% below the prior year - were the lack of large-sized rentals and a disproportionately big volume of lets for small premises. To date, the biggest contract registered was that signed by Douglas Holding, which will establish its main administrative office in the DUO new-build (Hans-Günther-Sohl-Strasse 5-11).

Rents: Biggest rise in Cologne
German Property Partners once again noted the highest average rents in Frankfurt, where tenants paid €17.70/m²/month and in Munich, where the rate was €16.00/m²/month; the lowest charges were in Stuttgart at €12.90/m²/month and Düsseldorf at €13.90/m²/month. The biggest increase in rates was in Cologne, where a 16% rise was attributable to the Zurich Insurance company’s lease in a new-build project, and the only falls in average rates were of 3% in Frankfurt and Düsseldorf, due to a large number of contracts for smaller, stock premises in less central locations.

At €38.00/m²/month and €35.70/m²/month Frankfurt and Munich also accounted for the highest premium rents. The increases were biggest in Munich and Berlin, at 13% each. In Munich this was caused by several agreements for large premises in the expensive inner city, and in Berlin a large number of high-priced leases were signed for small and medium-sized properties. “Two years ago it was rare to find takers for inner-city properties in Berlin willing to pay more than €20/m²/month,” comments Holzwarth. Only in Frankfurt did the premium rent fall, where it declined by 2%.

Vacant space: Reducing in all cities
The total stock of office space in the top 7 cities stands at 90.23m m², of which 5.6% stood empty at the end of the 3rd quarter. Year on year, the vacancy rate has fallen by 0.6%. In other words, 5.08m m² is available for rent at short notice in the top 7 cities. Without exception, all 7 locations registered falling vacancy rates. Companies seeking offices in Stuttgart and Munich had least choice as empty space makes up only 3.1% and 3.9% of total stock respectively, whereas the largest selection is to be found in Düsseldorf and Frankfurt, where vacancy rates are 10.0% and 11.5%.

For the years 2016 and 2017 German Property Partners has calculated that 2.03m m² of office space will be completed in 220 new-build developments in the top 7 cities. The biggest single market here is Hamburg with 474,000 m².

“The Brexit issue was uppermost at the end of the first half year, but it has now receded into the background. With growth rates of ten per cent and more in all three quarters, the letting business has been very brisk in Germany’s top 7 cities. The mood could hardly be better, as confirmed by the recently published ifo index of business confidence, which stands at its highest point since May 2014. In view of the way business has progressed thus far and the fact that a variety of potential contracts for large office suites are nearing completion, we are expecting to see a strong fourth quarter putting 2007’s record result of 3.52m square metres within reach,” says Holzwarth.

Top 7 office locations | Q1-3, 2016
Take-up of space
in m²
415,000 541,000 224,000 310,000 362,700 263,000 550,000 2,665,700
against prior yr in %
+ 17 + 10 - 19 + 48 + 21 + 40 + 11 + 17
Premium rent
in €/m²/month
25.00 26.00 26.50 21.50 38.00 22.80 35.70 -
Average rent in €/m²/month 14.90 15.50 13.90 14.75 17.70 12.90 16.00 -
Stock of office space in millions m² 13.43 19.08 7.62 7.80 11.71 7.68 22.92 90.23
Vacant space
in m²
675,900 760,000 760,500 410,000 1,345,200 239,000 891,500 5,082,100
Vacancy rate
in %
5.0 4.0 10.0 5.3 11.5 3.1 3.9 5.6

Source: German Property Partners

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