High level of letting activity in the city centre
With office take-up of around 86,000 sq m, the recovery of the Frankfurt market continued in the 3rd quarter, with the cumulative total at around 254,000 sq m for the first nine months of 2021, which is around 22 per cent above last year's figure. This fell short of the ten-year average by 23 per cent. Modern high-rise buildings remained sought after in Q3, as evidenced by lettings by Herbert Smith Freehills and Corestate in the Marienturm and the signing of law firm Baker Tilly in ONE.
Pierre Nolte, Head of Office Leasing Frankfurt at Cushman & Wakefield, explains:
"Compared to last year, the number of leases signed has increased significantly. The recovery should continue towards the end of the year, even though the forecast take-up of around 400,000 sq m is likely to be significantly below the pre-pandemic record levels. We are currently observing particularly high demand for high-quality space. In the short-to-medium term, this is likely to lead to a shortage of space in the CBD. With an average monthly rent of EUR 40/sq m, having seen an increase of over 45 per cent over the last five years, the banking district in particular has become much more expensive. This, combined with permanent remote working arrangements in many companies, is likely to support the trend towards smaller spaces."
After significant increases in vacancies with the onset of the Covid-19 pandemic, the trend has halted for the time being in the third quarter. In addition to lettings in existing stock, ongoing refurbishments of properties such as the Omega-Haus at Kaiserlei, which are therefore not available for immediate letting, also contributed to this. Vacancy accordingly fell from around 950,000 sq m in the previous quarter to around 914,000 sq m. This corresponds to a vacancy rate of 7.8 per cent. The peripheral submarkets of Eschborn, Niederrad and Frankfurt East have particularly high reserves of space: one-third of the total vacancy is in these three submarkets.
Compared to the previous quarter, the prime rent rose slightly to EUR 46.50/sq m per month. Over a twelve-month period, the increase amounted to 3.3 per cent. The weighted average rent across all new leases of the last twelve months was EUR 24.00/sq m per month at the end of September. Mainly thanks to high-priced lettings in high-rise buildings, it rose by 80 cents compared to Q2 2021.