TOP 7 OFFICE MARKETS 3Q2023: A cautious waiting game

In view of the recent leading research institutes’ announcement that they had revised their economic forecasts downwards, the quarterly result for Germany’s top 7 office property markets, prepared by German Property Partners (GPP) to coincide with the Expo Real, came as no surprise.

• Year on year, take-up of space in the top 7 cities continues its steady decline, dropping by 38 % to 1.66m m². Take-up shrank in every city, but for the first time ever Hamburg posted the highest result of the 7.
• Vacancy rates in the top 7 cities climbed continuously (from 4.9 % to 7.5 %), the amount of space standing empty increased in every market. Despite that, vacancy rates remained in the single-digit range.
• In the 3rd quarter only three new rental agreements and just one owner-occupier contract involving more than 10,000 m² of space were signed in the top 7 cities.
• At 6 % owner-occupiers accounted for an almost negligible proportion of business in the top 7 cities.
• Instead, agreements tended to be for smaller office suites; in Hamburg, for example, this meant less than 1,000 m², in Berlin under 1,500 m² and in Stuttgart 2,000 m² or less. 

The data also reveals that ....

• ... premium rents have risen in six of the cities and in Frankfurt they have remained at the high rates already reached. Again, Düsseldorf posted a particularly high increase of 36 %.
• ... average rents in Düsseldorf (+15 %), Stuttgart, Cologne and Frankfurt are rising too.

“At present the business mood is rather muted, and this shows in the lower take-up figures. However, there is still great demand for centrally located offices,” remarks GPP spokesperson Andreas Rehberg. “People are looking for modern offices, but at the moment searches are not necessarily leading to new contracts. Overall, negotiations take considerably longer, people are far more cautious about making a decision and very demanding on issues of fit-out, ancillary costs and sustainability. The question of incentives is also back on the table.” In some of the top 7 cities, moreover, appreciably more sub-leases and lease renewals are being seen.

In view of the circumstances, GPP, the association of Grossmann & Berger, Anteon Immobilien, GREIF & CONTZEN Immobilien, blackolive and E & G Real Estate, expects relatively brisk business in the 4th quarter, but is once again lowering its take-up forecast for the year to 2.46m m².