In Q3 2021, take-up in Germany’s top-5 office markets totalled 780,000 sq m, 54 per cent more than in the equivalent quarter last year. The current year totals 1.88 million sq m so far, 17 per cent above the level of a year ago. After last year's slump in take-up and the subdued start to 2021, there is now renewed impetus in market statistics and occupier sentiment. But the result is still 17 per cent below the five-year average, so there can be no talk of a return to "normal mode" yet. For 2021 as a whole, Cushman & Wakefield expects take-up to exceed 2.5 million sq m.Berlin leader in take-up
With 217,000 sq m of office space newly let or occupied by owner-occupiers, Berlin saw the highest take-up of any German city in Q3 2021. This is followed by Munich with 214,000 sq m - a strong quarterly result that was driven in particular by a major letting to the German Patent and Trademark Office (45,000 sq m) in the Pandion Soul development project. Hamburg (154,000 sq m) and Düsseldorf (109,000 sq m) also posted high quarterly results. In the first three quarters of 2021, Berlin (592,000 sq m, up 30 per cent year-on-year) is also ahead of Munich (453,000 sq m, down 3 per cent). In the same period, 23 leases were signed for more than 10,000 sq m of office space each, almost equalling the number for the whole of 2020 (25 ).
Christian Lanfer, Head of Office Agency Germany at Cushman & Wakefield stated
"Many office users are currently faced with the question of how to shape their working and space model in the future. A mixture of remote working and office could prevail," comments Christian Lanfer, Head of Office Agency Germany at Cushman & Wakefield. "The office must have a magnetic effect, appealing to employees emotionally. The office is then transformed from the headquarters into the 'heart quarters', where culture, learning and team spirit are the focus. But there will not be a blanket solution. Very easily accessible prime inner-city locations are increasingly the focus of users in the market."
Vacancy increase in all top-5 markets
The overall office vacancy rate in Germany's top-5 office locations was around 3.8 million sq m at the end of Q3 2021. This corresponds to a vacancy rate of 5.0 per cent, 0.9 percentage points higher than a year ago. The year-on-year vacancy trend ranges from +0.1 percentage points in Düsseldorf to +1.3 percentage points in Berlin and Munich. Stabilisation at the current level is expected by the end of the year.
Increase in completions and high construction volume
In the first nine months of 2021, around 895,000 sq m of new or core refurbished office space was completed (+13 per cent compared to the same period last year) - a large proportion of this in Berlin, with 383,000 sq m. At the end of the third quarter, 4.4 million sq m of office space was under construction across Germany - this is now the tenth quarter in a row with a construction volume above the 4 million sq m mark. Around 53 per cent of this is already let or occupied by owner-occupiers. The largest construction volumes continue to be in Berlin (1.79 million sq m) and Munich (1.29 million sq m). Further completions of 550,000 sq m are expected to the end of the year. The expected 2021 total of 1.4 million sq m would be 16 per cent above last year and 54 per cent above the five-year average. In 2022, however, completions will increase yet again.
Rents rise for high quality fit-outs and locations
Three markets exhibited increasing prime rents during the quarter: Frankfurt and Hamburg by 50 cents each and Munich by 1 EUR/sq m per month. Average rents rose in the 12-month period by +2.6 per cent in Munich, by +3.7 per cent in Frankfurt and by +6.5 per cent in Hamburg. The prime rent index for the top-5 markets stands at 142.2 points (2010=100) at the end of Q3 2021. A further increase of 0.6 per cent is expected by the end of the year, and 1.2 per cent next year. The average rent index is currently at 149.4 points. After six quarters of increasing rent-free periods in prime central locations, they stagnated in the third quarter of 2021. For a 5-year lease, rent-free periods currently account for around 6 per cent.