Office letting market Hamburg 1Q2022: Escalator clause becoming a key issue during lease negotiations

Companies in Hamburg have been very active during the 1st quarter of 2022, with take-up of office space at 135,000 m². “Concerns about the German economy sparked by Russia’s attack on Ukraine are not, for the moment, reflected on the market for office space in Hamburg. On the contrary, most companies have been “doing their homework” over recent months, and are now ready to view properties and implement re-organization plans for their future business needs. This is especially true of large companies,” says Andreas Rehberg, spokesperson for the managing board of Grossmann & Berger, member of German Property Partners (GPP). Against the 1st quarter of 2021 the volume of turnover rose by some 4 %. “Thanks to the current increase in inflation, an escalator clause designed to protect the contracting parties against risks such as inflation, has become a key part of rental negotiations. In particular when longer-term agreements are signed off plan, the escalator clause plays a crucial role,” Rehberg adds. 

Market details:

• Between January and March 2022, as in the 1st quarter of 2021, four agreements were signed for premises in the size category of 5,000 m² or more. The leases included those taken by Veolia Umweltservice, Evotec and Vestas Deutschland. Nevertheless, year on year this size category no longer accounted for the largest proportion of take-up (35 % in 2021) because the lion’s share (27 %) had shifted to the 2,000 to 5,000-square-metre sector. The larger size category comprised 20 % of take-up, thus moving down to second place.
• The proportion of owner-occupier transactions grew from 5 % to 16 %, but at 21,000 m² the total was low for Hamburg.
• Since Hamburg companies are increasingly taking space in central locations in order to attract and keep employees, City and HafenCity sub-markets flourished. This is evident from the fact that their share of take-up is higher than in other districts at 29 % and 19 %. “Location and the quality of the building have top priority together with a degree of saving on space requirements,”Rehberg remarks. Hamburg East sub-market also accounted for a double-figure share of take-up (12 %), partly due to the Evotec lease for 5,300 m² of space. 
• Year on year the premium rent in Hamburg increased by 50 cents/m²/month, the average rent by 60 cents/m²/month.
• The amount of office space available within six months fell by about 6 % within the space of a year to 493,200 m². For the first time the vacancy rate including sub-let space started to fall back again, from 3.8 % to 3.5 %. “In view of delays within the supply chain and shortages of materials due to the situation in Ukraine, some fit-out or completion dates for new-builds may be pushed back. In the longer term however, one may count on a growing supply of space,” says Rehberg confidently. As matters stand at present, some 53 office buildings will be completed between 2022 and 2023, offering a total volume of 578,000 m². The pre-let ratio was some 60 %.