Office market top-7 4Q2016

2007 record smashed

Press release | Hamburg

Figures for 2016 from German Property Partners (GPP) reveal that the take-up of office space in Germany’s top 7 cities reached a new record total of 3.9m m². This result is well above the previous record figure of 3.5m m² posted in 2007. The result was about 10% above the figure for 2015. Towards the end of the year there was a significant increase in letting activity in the top 7 locations. In the 4th quarter alone about 1.2m m² of office space was taken up. As in the prior year, owner-occupiers accounted for around 9% of the total. German Property Partners noted new record take-up in Berlin (820,000 m²), Cologne (410,000 m²) and Stuttgart (432,000 m²). “Many major German companies such as Daimler Benz, Deutsche Bahn, Axel Springer, BMW and Robert Bosch decided to move offices in 2016, thus contributing to the strong result for the year,” comments Björn Holzwarth, spokesman for German Property Partners.
Take-up of space: Record figures in Berlin, Cologne and Stuttgart
At the end of the 4th quarter of 2016 three of the top 7 locations reported double-digit growth rates: Stuttgart (+49 %), Berlin (+41 %) and Frankfurt (+36%). Three locations posted single-digit growth - Hamburg (+2%), Berlin and Munich (+1% each). Düsseldorf fell 21% below the prior year’s total.
Stuttgart returned the biggest increase, i.e. 49%, as well as a record result of 432,000 m². The proportion of owner-occupiers was very high, at 31% (132,000 m²). 14 large-scale transactions contributed 225,000 m² of office space to total take-up. One of these was the 4th-quarter rental agreement signed by Robert Bosch for 23,000 m² of office space in a new development on Borsigstrasse in Stuttgart-Feuerbach.
The second-biggest year-on-year increase (41%) was reported in Cologne, where take-up of office space totalled 410,000 m², setting a new record far above the old one dating from 2011 (330,000 m²). More than a quarter of the total space let was attributable to five agreements for over 12,000 m² each. Of special note is insurer Zurich Versicherung’s plan to merge its Bonn and Cologne offices in 60,000 m² of office space in the Deutz sub-market. This will act as a starting signal for the big MesseCity development.
Frankfurt returned an excellent result with take-up rising by 36% to 563,400 m² for a total that was only slightly below the record of 578,000 m² set in 2007. Four agreements were signed for more than 10,000 m² of office space, so that three times more space was let in this size category than a year ago. The biggest rental contract was signed in the 4th quarter by Deutsche Bahn for 45,000 m² of office space in the new Grand Central development (Adam-Riese-Strasse, Hafenstrasse 51).
Posting 2% growth year on year, Hamburg attained a very good letting result of 550,000 m², due in large part to 14 agreements for premises measuring 5,000 m² and upwards. The biggest agreement of 2016 was signed in the 3rd quarter when Olympus Deutschland leased 23,800 m² in the Poseidonhaus (Amsinckstrasse 63-71d).
Year on year, take-up of office space rose by 1% in Berlin to reach 820,000 m² and another new record result. 31 lets or construction starts for owner-occupiers offering over 5,000 m² of space accounted for 45% of the total take-up. The biggest single transaction involved the 3rd-quarter construction start of the Axel Springer Medien Campus (Schützenstrasse) with some 40,000 m² of office space.
Munich likewise saw take-up grow by 1% year on year to a total of 764,000 m² of office space. In the 4th quarter the BMW Group made a major contribution to this result by signing a rental agreement for 32,000 m² in the Businesscampus development in Unterschleissheim (Landshuter Strasse 26).
Reporting take-up of 330,800 m² of office space, Düsseldorf was unable to come close to the record result seen in the prior year. The reason for the 21% decline in take-up was the lack of agreements for large premises. The majority of contracts related to properties sized between 300 and 1,000 m² and together these comprised 91,900 m². The biggest rental agreement of the year was for 15,000 m² in a newbuild on Werdener Strasse signed by accident insurer Unfallkasse Nordrhein-Westfalen in the 4th quarter.
Top 10 known agreements | top 7 locations | Q1-4, 2016
City Project/property Tenant/owner-occupier Rented space (m²)
STU Industriestrasse Daimler AG (owner-occupier) about 75,000
CGN “MesseCity”, Cologne-Deutz Zurich Versicherung (insurance)  about 60,000
FFM Grand Central, Adam-Riese-Strasse, Hafenstrasse 51 Deutsche Bahn AG  about 45,000
BER Medien Campus, Schützenstrasse  Axel Springer (owner-occupier)  about 40,000
MUC Businesscampus, Landshuter Strasse 26, Unterschleissheim BMW Group about 32,000
BER Mauerstrasse 28 Federal Ministry for Health (owner-occupier)  about 27,000
HAM Poseidonhaus, Amsinckstrasse 63-71d Olympus Deutschland about 23,800
STU Borsigstrasse Robert Bosch GmbH about 23,000
STU Spiegelbergerstrasse Robert Bosch GmbH (owner-occupier) about 20,000
CGN Butzweilerhof-Allee Bundesagentur für Arbeit (Federal Labour Agency) about 19,500
Rents: Pushed up by shortage of space
Six of the top 7 locations reported growth in the average rent rates, in particular Cologne (+14%), Berlin (+8%) and Hamburg (+7%). As in the past, the highest average rents were paid in Frankfurt (€18.50/m²/month) and Berlin (€16.10/m²/month), followed by Hamburg and Munich, both with an average of €15.50/m²/month. Similar rates were seen in Düsseldorf (€14.40/m²/month) and Cologne (€14.30/m²/month). Compared with the other top 7 cities, Stuttgart has the most reasonably priced offices, with rents averaging €12.90/m²/month.
Mirroring the changes in the average rent, six of the top 7 cities saw a rise in their premium rent - with the biggest gains in Berlin (+15%) and Munich (+8%). As expected, the top rates for premium rents were paid in Frankfurt (€38.50/m²/month) and Munich (€35.25/m²/month). Due to a greater shortage of available properties, rents increased appreciably in Berlin, with the premium rate rising to €27.50/m²/month. The premium rent in Düsseldorf was €26.50/m²/month and thus roughly equal to the rate a year ago, in Hamburg it rose by 4% to €26.00/m²/month. Stuttgart and Cologne saw premium rents grow by a modest 1% but rates remained well below those charged in the other top 7 cities at €23.00 and €21.50/m²/month respectively.
“Rents have risen in the top 7 cities, both at the top of the market and in the average-rates sector. This has happened because of the greater shortage of available properties and strong demand for offices in the sought-after locations. In the non-central parts of the cities, too, appreciably higher rents are being paid for newbuild office space than a year ago. Planned office developments are let before construction has even started and command top rates,” explains Holzwarth.
Vacant space: Ongoing decline
The amount of space standing empty in the top 7 cities fell by 7% and reached the total of 4.9m m² by the end of 2016. Based on a total stock of office space of 90.5m m², the corresponding vacancy rate is 5.4%. Year on year, the amount of vacant space shrank in six of the top 7 locations. This decline was biggest in Stuttgart (-19%) and Berlin (-12%). Stuttgart also had the lowest vacancy rate at 2.8%. Likewise in Munich, the vacancy rate fell to its lowest-ever level of 3.7%. “There is practically no office space available at all in the centre of Munich, where the vacancy rate is one per cent,” reports Holzwarth.
Completions in 2017 and 2018 (2.3m m²) are unlikely to ease the shortage of space in the top 7 cities, because the majority has already been let ahead of the construction start. The highest levels of construction activity were registered in Berlin (464,000 m²), Hamburg (418,000 m²) and Frankfurt (410,400 m²). Holzwarth comments that, “The shortage of available space is encouraging speculative building once more. But even that will not bring lasting relief to the office market.”
In view of unpredictable political developments in many parts of the world (US foreign policy, Brexit, crisis in Italy, various elections) the research institutes have reduced their economic forecasts for 2017. Businesses might take a more cautious approach to capital spending in view of these uncertainties. However, over the course of the year the economy is likely to adjust to the political environment that emerges. “The current mood of uncertainty is unlikely to have much effect on the markets for office space in the top 7 cities because the German labour market remains strong. At German Property Partners we therefore predict that take-up of office space in 2017 will reach some 3.5m m², slightly below the very strong result returned in 2016. Take-up could be especially hampered by the ongoing shortage of available properties,” says Holzwarth.
Top 7 locations | Q1-4, 2016
Take-up of space
in m²
550,000 820,000 330,800 410,000 563,400 432,000 764,000 3,868,200
against prior yr in %
+2 +1 -21 +41 +36 +49 +1 +10
Premium rent
in €/m²/month
26.00 27.50 26.50 21.50 38.50 23.00 35.25 -
Average rent in €/m²/month 15.50 16.10 14.40 14.30 18.50 12.90 15.50 -
Stock of office space in millions m² 13.47 19.17 7.62 7.80 11.72 7.74 22.96 90.47
in m²
684,100 710,000 750,000 400,000 1,255,400 220,000 843,000 4,862,500
Vacancy rate
in %
5.1 3.7 9.8 5.1 10.7 2.8 3.7 5.4
2017 + 2018 in m²
418,000 464,000 220,000 200,000 410,400 288,700 305,000 2,306,100

Source: German Property Partners

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