107,100 sq m of take-up was achieved in the Frankfurt office letting market in Q1 2022, reports international real estate consultancy firm Cushman & Wakefield. This represents a year-on-year increase of around 34 per cent. The ten-year average was exceeded by 8 per cent and the five-year average by 7 per cent.
Owner-occupiers increase letting take-up
Owner-occupiers accounted for a significant proportion of take-up (36 per cent) and were also responsible for the two largest transactions in Q1. With the start of construction of its new campus in Eschborn, GIZ was responsible for the only deal above the 10,000 sq m mark, with around 28,000 sq m of office space. Sparda-Bank, also an owner-occupier was responsible for the second-largest deal. The bank will occupy around 9,100 sq m of space in its high-rise project in Europaviertel on completion in 2025. Pure letting take-up also rose by around 11 per cent compared to Q1 2021, to around 69,000 sq m. The largest letting in the first three months was to Deutsche Bank, with around 6,100 sq m in the IBC in City-West.
"A large number of companies have now committed to a workplace strategy for the post-pandemic era. They are now considering whether to implement the new concepts in their current office space or in a new location. The increasing economic uncertainty associated with the war in Ukraine has so far not led to a reduction in activity on the user side. This is because, as a rule, a reduction in space is being sought anyway. Accordingly, we are registering more new searches for space in all size classes with a clear focus on improved location and building quality."
Vacancy level stable below the 1 million sq m mark
The vacancy rate was almost unchanged compared to the previous quarter, falling slightly by 10 basis points to 8.0 per cent. Over the course of 12 months, the increase amounted to 20 basis points. In total, around 944,000 sq m was available for immediate occupancy at the end of the first quarter. Slight increases in vacancy are expected by the end of the year in view of the expected completions of speculative construction projects.
Particularly in the CBD, the availability of space has fallen significantly again after interim increases as a result of the pandemic. Here the vacancy rate is currently at 4.2 per cent and thus significantly below the level of the market as a whole. Especially in the absolute premium segment, demand exceeds supply. As many users in this segment prefer properties with a better building quality when moving, the pressure to modernise older existing buildings is increasing. Pierre Nolte: "Despite rising vacancy rates, the lack of availability of prime space in prime locations will lead to competition on the user side in the coming years."
New construction projects with low occupancy rates
In 2022, around 141,000 sq m of office space is expected to come into the market. This means that construction activity this year is significantly lower than in the previous two years, due in particular to delays in some projects, which will lead to an increased completion volume in 2023 (230,700 sq m expected) and 2024 (239,100 sq m expected). At 53 per cent, the occupancy rate in 2022 is comparatively low, so that the completions of the speculative - and not yet let – the "FLOW" and "The Move" projects in Gateway Gardens are likely to result in significant increases in vacancy in the Airport submarket.
Average rent declines slightly
The weighted average rent for all new lettings in the last twelve months is currently quoted at EUR 23.00/sq m per month. This corresponds to a slight decline of EUR 0.20/sq m or 0.9 per cent compared to the previous quarter. Compared with a year previously, the average rent has risen by EUR 0.40/sq m. The prime rent in the first quarter was unchanged from the previous quarter at EUR 46.50/sq m per month. Cushman & Wakefield expects slight increases in both prime and average rents by the end of the year - due to higher prices for raw materials, which affect the development of office space, and the focus of many occupiers on rather high-priced new buildings.