Top-7-office markets Q4/2020: A ray of hope in the new year

Hamburg, 05.01.2021Press release

In the 4th quarter of 2020 office-letting in Germany’s top 7 cities began to increase for the first time since the start of the pandemic. Thus the lowest quarterly decline was posted in the period between October and December with lettings down year on year by 22 %. Nevertheless the coronavirus pandemic had a huge impact on office markets, which saw business drop by more than a third in 2020. German Property Partners (GPP) recorded take-up of space in Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich totalling 2.47m m². That is the lowest figure since 2009. GPP membership comprises Grossmann & Berger, Anteon Immobilien, GREIF & CONTZEN Immobilien, blackolive and E & G Real Estate.

office space Top-7-office markets 4Q2020

TAKE-UP OF SPACE REFLECTS UNCERTAINTY

“Without exception, take-up of space declined in all top 7 cities,” says GPP spokesperson Oliver Schön. The biggest slump was registered in Stuttgart where industry and the automotive sector were loath to sign large rental agreements, leading to figures 55 % below the prior year’s. Berlin and Cologne came through the last three months of the year relatively unscathed with totals down by 28 %. In the cathedral city of Cologne the office market benefited from three agreements for large amounts of new-build space which together comprised 23 % of take-up.

 

NO RISING TIDE OF VACANT SPACE

In 2020 the coronavirus pandemic did not generate a tidal wave of tenants vacating space. The vacancy rate had risen moderately in all cities except Düsseldorf by the end of the year and now ranges between 2.1 % and 7.3 %. Accordingly, the vacancy rate across all top 7 cities increased year on year from 2.9 to 3.5 %. “Following a stretch of record low vacancy rates, supply and demand are becoming better matched than they have been for many years,” says Schön. “As no-one knows how the situation will develop, some firms are trying to save rental costs by sub-letting some of their space. However, many are postponing any definite long-term decisions about alterations, renting less space or moving to other premises. A paradigm shift in work patterns towards greater flexibility was already in motion before coronavirus hit. The pandemic is now forcing most companies to confront the issue and, as a result, question exactly what office space they need.”

In most cases the logical consequence of the coronavirus pandemic has been to halt the untrammelled growth of office rents seen over recent years. In Düsseldorf, Cologne and Frankfurt the premium rent is still high but stagnant. German Property Partners has noted low single-figure growth in the other four major cities. Changes in average rents ranged from -3 % in Düsseldorf to +9 % in Munich.  

 

CAUTIOUS OPTIMISM ABOUT 2021

Over the next two years a total of 3.60m m² of new office space will be completed in the top 7 cities. Question marks about future business developments have already pushed the pre-let ratio down to 53 %, well below the 64 % of previous years. Whereas in some cities pre-let ratios were as high as 80 to 90 % in 2018 and 2019, in isolated cases rates had already halved by the end of 2020.

“The initial economic forecasts for the year 2021 permit cautious optimism. Industrial bosses are now far more optimistic about the future than they were in the third quarter, partly due to growth in China. However, to justify such optimism childcare must be assured, the borders kept open and supply chains maintained. Only then will confidence return to the labour and office markets of a country as dependent on exports as Germany,” says Schön. “The first quarter is usually less brisk and in view of the ongoing high rates of infection it is to be expected that the market will remain fairly quiet.” 

Major known agreements for 15,000 m² or more | Top 7 locations | Q1-4 2020

City 

Project/property 

Tenant/owner-occupier 

Rental area (ca. m²) 

BER

“Cule”, An den Treptowers 3

Deutsche Rentenversicherung Bund (state pensions)

84,300

MUC

Lyonel-Feininger-Strasse/Anni-Albers-Strasse

Amazon

34,000

MUC

“Optineo”, Friedenstrasse 10

KPMG

32,000

DUS

Neuenfelder Strasse 19

Oberfinanzdirektion (tax & finance office)

29,800

BER

“Gasometer”, Euref-Campus

Deutsche Bahn

25,000

BER

Wagner-Reye-Allee

Berliner Sparkasse

22,000

CGN

“Centraal”, Barmer Strasse

KPMG

19,700

CGN

“QUADRA”, Lina-Bommer-Weg 9-11

AOK Rheinland / Hamburg (health insurance)

18,000

FFM

“Eschborn Gate”, Alfred-Herrhausen-Allee 1-5, Frankfurter Strasse 2-8, Eschborn

Samsung

17,600

FFM

“MC 30”, Marie-Curie-Strasse 30

LBIH

17,000

FFM

“Four T1”, Grosse Gallusstrasse 10-14

DekaBank.

16,000

BER

Heilbronner Strasse 16

Deutsche Rentenversicherung Bund (state pensions)

15,600

Transactions occurring in the quarter covered by this report are highlighted. Source: German Property Partners (GPP)

 

Top 7 cities | 1st-4th quarters of 2020

 

HAM 

BER 

DUS 

CGN 

FFM 

STU 

MUC 

Top 7 

Take-up of space 

in m² 

340,000

653,000

245,200

210,000

365,500

141,000

515,000

2,469,700 

Change 

against prior yr in % 

-38

-28

-47

-28

-39

-55

-32

-36 

Premium rent 

in €/m²/month 

30.50

39.50

28.50

26.00

45.00

25.50

38.50

- 

Average rent [€/m²/month] 

17.50

28.60

16.10

16.50

21.90

16.40

22.30

-

Stock of office space in millions m²

13.92

20.15

7.30

8.00

11.52

8.07

23.33

92.29

Vacancies

in m²

468,000

420,000

504,600

230,000

845,400

249,000

530,000

3,265,000

Vacancy rate

in %

3.5

2.1

6.9

2.9

7.3

3.1

2.3

3.5

Completions

2020 + 2021 in m²

378,000

1,162,400

313,000

200,000

580,400

289,900

645,000

3,569,000

Pre-letting ratios 2020 + 2021 in %

61

48

59

50

44

59

62

53

 Source: German Property Partners (GPP)

 

Note: This is the corrected version from 15.1. Due to a suspended deal the numbers have changed minimally.

Press contact


Berit Friedrich

Hamburg
Bleichenbrücke 9 (Stadthöfe)
20354 Hamburg
Phone +49 (0)40/350 80 2-620
Fax +49 (0)40/350 80 2-200
Email presse@germanpropertypartners.de
Internet www.grossmann-berger.de