Hamburg's office letting market gained further momentum in Q2 with take-up of 176,000 sq m (Q1 2022: 131,000 sq m). In total, international real estate consultancy firm Cushman & Wakefield (C&W) registered office take-up of around 307,000 sq m in the city in H1. This is the second-highest half-year result ever, after 2019, and an increase of 45 percent compared to the 1st half of 2021. The H1 ten-year average was also exceeded by 28 percent.
Significant increase in new lettings, large deals dominate office take-up
From January to the end of June 520 lettings took place. This is not only twice as many as in the same period last year (260), but also the H1 five-year average (250) was exceeded by more than 100 percent. This reflects the high pent-up demand post-Covid, as well as the implementation of new workplace concepts by companies.
C&W registered eleven major deals of over 5,000 sq m, together totalling 104,500 sq m or 34 percent of office take-up. Development project pre-letting accounted for 75,000 sq m or 72 percent of this. The largest letting was of 30,000 sq m to Haspa in the new "Deutschlandhaus" project in the city centre, which is currently under construction. A further 22 percent was contributed by the segment between 1,000 sq m and 3,000 sq m.
Prime and average rents reach new all-time highs
The high proportion of large-scale development project lettings in central locations in H1 2022 boosted the prime rent to a new all-time high of EUR 32.00/sq m per month. This was the fourth consecutive increase, and is a y-o-y increase of EUR 2.00 or around 7 percent. Due to rising construction and financing costs, office users are having to accept higher rents, among other things, to compensate for the increases in development costs. Due to the current high demand for modern office space in prime locations, C&W expects prime rents to continue to rise to the end of the year.
The weighted average rent also reached a new peak, at EUR 20.00/sq m per month across all building classes. This is EUR 1.95 or around 11 percent more than at the end of June 2021, reaching the EUR 20 threshold for the first time.
Tobias Scharf, Head of Office Agency Hamburg at Cushman & Wakefield, explains:
"Economic uncertainties due to the Ukraine war, inflation, supply chain volatility and the threat of an energy crisis are omnipresent, but are not yet reflected in Hamburg's office letting market. Take-up in H1 is back to pre-Covid levels after two slow years and the search pipeline suggests a good result for H2 as well, so take-up of around 550,000 sq m is achievable."
Location and fit-out quality remain important criteria for office users
Location and fit-out quality continue to have a high priority among office users. This is clearly reflected in the distribution of take-up among existing buildings and project developments as well as among Hamburg's office submarkets: the market share of take-up in projects under construction or in planning is around 35 percent in the first half of 2022, compared to only around half of the five-year average of 18 percent in the first half of the year. Letting activity was again concentrated in the central locations. With 29 percent of take-up, the city centre submarket is in first place (88,600 sq m), followed by HafenCity with around 16 percent (50,300 sq m). No other submarket achieved a double-digit market share.
Construction and real estate firms lead the sector ranking by take-up
In contrast to the first half of 2021, in which industrial companies accounted for the most take-up with 17 percent or around 36,000 sq m, the sector ranking in the first half of 2022 is led by companies from the construction and real estate sector, accounting for 24 deals totalling over 36,000 sq m of office space (12 percent). Banks and financial services providers and industrial companies share second place with around 32,000 sq m of take-up each. The largest number of leases (30) were signed by consulting companies, for areas totalling 15,000 sq m.
Continued large construction volumes and high pre-letting rates
In the first half of 2022, around 98,000 sq m of new and refurbished office space was completed in Hamburg. Of this, 83 percent was already let or allocated to owner-occupiers at the time of completion. The largest property completed in the second quarter is Campus Hamburg in the Barmbek submarket, most of which will be occupied by Société Générale.
In total, around 535,000 sq m of office space is under construction. This is around 7 percent more than the five-year average (500,000 sq m). Of this, 68 percent has already been allocated to users. In addition, there are concrete plans for further developments of 717,000 sq m.
Supply of existing space remains stable year-on-year
Compared to last year, the vacancy rate remains stable at 4.2 percent. Absolute vacancy fell by only 2,000 sq m to 633,000 sq m. The large construction volume, and thus large amount of new office space coming onto the market, is cushioned by the high pre-letting rates. A significant increase in vacancy in newly-constructed space is not expected in the short to medium term. However, vacant existing space could cause the vacancy rate in Hamburg to rise again moderately to the end of the year.