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Moderate but robust start to the year on the Frankfurt office market

06/04/2023

The year began with moderate take-up in the Frankfurt office market, reports international real estate consultancy firm Cushman & Wakefield (C&W). Lettings and owner-occupation deals totalling 92,200 sq m were completed in the first quarter. While this represents a 12 per cent increase in take-up compared to the weak Q4 2022, the year-on-year result is 14 per cent weaker. Both vacancy and rents are rising.

Number of small lettings on the increase

Despite a lower year-on-year take-up, the number of lettings increased by around 13 per cent. While 114 deals took place in Q1 2022, there were a total of 129 in Q1 2023. This trend applies above all to the size segment up to 500 sq m.

The largest letting in the first quarter was concluded by Universal Investment for just under 9,600 sq m in the Timber Pioneer development project in Frankfurt's Europaviertel. The next largest deal was concluded by a public administration tenant, who leased around 9,100 sq m at Breitlacher Straße 92 in Frankfurt Rödelheim. A further 5,800 sq m was taken by Massif Central in Bethmannhof in the city centre.

Pierre Nolte, Head of Office Agency Frankfurt at Cushman & Wakefield, explains: "Compared to other top-5 locations, Frankfurt office market performed moderately but robustly in the first quarter. Due to the postponement of some large-area lettings into 2023, take-up was increased compared to the previous quarter. Further large-volume applications are active in the market and should ensure that office take-up remains at the previous year's level over the course of the year, despite economic challenges and the general trend towards space reduction."
 
Vacancy rate rises to 8.7 per cent
 
The vacancy rate stands at 8.7 per cent at the end of Q1 2023. Around 1 million sq m of office space was available for immediate occupancy at the end of March. This means that the vacancy rate has risen by 0.6 percentage points compared to the previous quarter and by 0.7 percentage points compared to the same point last year.

High completion volume in 2023 and 2024
 
In the first quarter, around 24,000 sq m of new office space was completed in the Frankfurt market area. These include The Move Orange at the airport, with 12,000 sq m of space, and the second construction phase of Oststern in the Ostend submarket, with 9,400 sq m of office space. A completion volume of around 170,000 sq m is expected for 2023 as a whole. The current pre-letting rate here is just under 44 per cent. In 2024, approximately 258,000 sq m of office space is expected to be completed. Of this, 56 per cent has already been pre-let.

Average rent continues to rise

The weighted average rent across all new lettings in the last 12 months is 25.70 euros/sq m per month. Compared to Q4 2022, this corresponds to an increase of 0.90 euros/sq m or 3.6 per cent. Compared 12 months previously, the weighted average rent has risen by 2.70 euros/sq m (11.7 per cent). The growth is mainly due to lettings in modern, energy-efficient, and thus higher-priced, office space. The prime rent at the end of the first quarter was 47.50 euros/sq m per month, unchanged from the previous quarter. Over the last 12 months, the prime rent has risen by 1.00 euro/sq m. C&W expects a further increase in rents, as the willingness of many occupiers to rent higher-quality, ESG-compliant space in central locations remains high.

 

 

Office Frankfurt Q1 2023

 

 

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verena bauer
Verena Bauer

Head of Business Development Services, Germany • 60311 Frankfurt am Main

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