Whereas the results of the first half year owed a lot to the Deutsche Telekom lease in City North, the 3rd quarter has proved to be the strongest of the year so far, with 155,000 m² of offices newly let in Hamburg. Figures from the property services provider Grossmann & Berger put the total result for the first three quarters at 380,000 m² of office space, a year on year rise of 17%. The share attributable to owner-occupiers was some 20%, i.e. about 73,000 m² of office space. “In addition to three leases for over 10,000 m² the strong result is, first and foremost, due to a large number of lets for over 1,000 m² and 2,000 m². We haven’t seen such a strong third quarter since 2011,” says Andreas Rehberg, managing director of Grossmann & Berger.
Three large leases in the 3rd quarter
Rather like the situation in the previous quarter, some 36% of the space taken up was registered in the 5,000 m² or more section of the market; altogether 2014 has seen eleven such leases, three of them in the 3rd quarter. In terms of size, the biggest new agreement was the building start for the VBG head administrative offices (Krüsistrasse/Drosselstrasse, Bermbek) to provide the insurance company with 22,000 m² of office space. There was great public interest in the two next-biggest agreements concluded in the 3rd quarter: WPP Deutschland Holding GmbH & Co. KG plans to group its Hamburg companies together in the “Zeisehallen Studios”; this new-build project on a vacant lot on Friedensalle/Behring-strasse (Altona) will provide some 12,600 m² of office space. And the Funke Media Group is relocating the staff of Hamburger Abendblatt, a newspaper, to 10,300 m² of space in the “Burstah Offices” (Grosse Burstah 18-30). Grossmann & Berger acted as broker for this latter agreement. The small office segments, i.e. 500 m² or less and 1,000 m² or less, and the mid-sized segment of 2,001 m² to 5,000 m² accounted for almost equal shares of the letting market, at 17% and 16% respectively. Interesting to note in this size category are the four leases signed by a games developer in Bahrenfeld, which add up to about 13,000 m² of office space.
City South and City North almost equally popular
At the end of the 3rd quarter City’s take-up of space is once again far ahead of the other sub-markets for office letting, with a share of 23% (85,900 m²) and 149 agreements signed. Among the biggest agreements signed in City in the 3rd quarter were, apart from the Hamburger Abendblatt lease that was already mentioned, one concluded by Kreditech Holding SSL GmbH for 3,850 m² (LES 1, Ludwig-Erhard-Strasse 1) and Deutsche Ring Bausparkassen AG for 3,000 m² (Ludwig-Erhard-Strasse 22). The next biggest sub-markets were City South (42,200 m²) and City North (41,000 m²) which each accounted for around 11%. Whereas figures for take-up of office space in City North are primarily due to the Telekom Deutschland lease for 32,000 m² at Überseering 2, City South registered the second-highest number of agreements at 55. Among the companies signing new agreements in City South during the 3rd quarter were Star Finanz-Software Entwicklungs und Vertriebs GmbH (3,300 m² at Grüner Deich 15-17) and EHA Energie-Handels-Gesellschaft mbH & Co. KG (some 2,600 m² at the VTG Centre, Amsinckstrasse 57-61. Fourth and fifth-placed HafenCity (31,900 m²) and Barmbek (30,800 m²) each accounted for some 8% of office take-up.
Internet/information industry profits from media environment
As in the same period last year, companies from the information and telecommunications sector were the most active, renting 96,500 m², which translates into 25% of total office take-up. “As an established media location, Hamburg is attracting more and more companies offering associated online and internet services. In the current market environment they are growing disproportionately fast and thus need large amounts of space,” remarks Rehberg. Trailing some way behind, trade & gastronomy (54,700 m²) follows with 14%, neck and neck with consultancies/services to business (53,200 m²). One representative of the latter is the advertising group WPP, which, as previously mentioned, signed a lease in Altona. Insurance companies (42,500 m²) also reached a double-digit share of the total at 12%.
Demand for new-build space inflates average rent
Year on year the premium rent for office space in Hamburg has risen by one euro. At the end of the 3rd quarter the premium rent in Hamburg (top price segment with a market share of 3% of lettings in the past twelve months) stood at 24.50 euros/m²/month. The average rent, weighted by space taken, rose by a further 20 cents to reach 14.50 €/m²/month. This is its highest level since the prior quarter and the year 2011. “The current rise in average rents is a reflection of steadily growing demand for large, contiguous suites of new-build office space at correspondingly high rents”, explains Rehberg.
Vacancies lower than any time since 2010
Out of some 13.3m sqm of office space in Hamburg, some 840,000 m² are available for rent within a short period of time. The vacancy rate has been falling since 2010 and by the end of the 3rd quarter it had reached a new low of 6.3%, including sub-let space (6.0% without sub-let space). Compared with the same period last year it has thus fallen by a further 0.3 percentage points. The 36 projects due for completion in the years 2014/2015 are expected to add around 253,000 m² of office space to the market. Contracts have already been signed for 62.5% of the total (158,000 m²).
“The volume of new-build space freely available therefore adds up to only 95,000 m² and is thus reaching a critical level. A properly functioning office market needs an adequate supply of available properties. In the current environment it is increasingly difficult for large companies to find offices that their employees think attractive and that match the image the firm wishes to project," says Rehberg. “Another reason for the low vacancy rate is that some companies have signed new leases for large amounts of office space not yet vacated and these are thus not yet available at short notice.”
Anticipated take-up for 2014 is 500,000 m²
In view of the fact that economic development in the eurozone remains relatively weak, the political conflicts in Ukraine continue unresolved and tensions in the Middle East are still rising, the growth forecasts for the German economy are much less optimistic than three months ago. Exports, one of the mainstays of Hamburg’s economy, are increasingly suffering from these developments. Despite that, the mood on the German labour market remains positive. “Therefore we are not anticipating any significant impact on the office market in Hamburg. We expect the year 2014 to close with total take-up of office space at around 500,000 m²,” says Rehberg. “The low volume of speculative space coming onto the market coupled with a high level of take-up will probably serve to further reduce the vacancy rate in the coming months.”