July 11, 2012, Munich – Approximately 1.29 million m² of office space was newly let or taken over by owner-occupiers in the six most important office markets in Germany (Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart) during the first half-year of 2012. “This represents a decline of some 9% versus the previous year,” says Andreas Trumpp, head of research at Colliers International in Germany. “Although more office space was turned over from April to June 2012 than between January and March, the low number of transactions in excess of 5,000 square metres in the current year has given rise to the low surface area turnover in the current year in comparison with the second quarter of the previous year” he adds. Without taking account of owner-occupiers of (previously) occupied office space, pure letting turnover declined in comparison with the previous year by some 5 % and finished at 1.19 million m², whilst owner-occupiers occupied approximately 41 % less space than 12 months ago and accounted for only about 100,000 m².
Turnover development only stable in Berlin and Hamburg
Whilst at the end of the first quarter only two office markets with Frankfurt and Stuttgart reported an increase in terms of surface turnover compared with the previous year, these two locations now also report a decrease due to the low number of large-area lettings compared with the previous year“, Andreas Trumpp remarks. Only Berlin with 286,900 m² and Hamburg with 215,000 m² surface turnover achieved values just about at the previous year’s level. The most noticeable downward trend was recorded by the turnover front-runner Munich, where with 320,500 m² some 17 % less office space was let than in 2011. The reason for this development is that the letting volume chiefly in the size segment above 5,000 m² was, as anticipated, almost halved due to the many transactions in this segment concluded in the previous year. Surface turnover also declined noticeably in Frankfurt, where with 216,100 m² approximately 11% less office space was let, and in Stuttgart, where a decline of about 12 % to 113,000 m² had to be accepted. Surface turnover in Düsseldorf was 137,000 m² and therefore 7 % below the level of the previous year. The largest rental contract signings in the current year include amongst other things property of approximately 16,700 m² rented by the Federal Ministry of Defence in Berlin, the SEB in Frankfurt with a total of around 13,600 m² and Union Investment Asset Management, also in Frankfurt, with a total of approximately 12,700 m².
Continued easing of the situation as regards vacant office space
The trend towards a decline in vacant premises that has been going on for several quarters due to positive rates of net absorption coupled with continued low completion volumes continues. “At approximately 6.7 million square metres, the current level of vacant office space is more than a million square metres lower in comparison with the same time last year”, Andreas Trumpp emphasises. This means that the vacancy rate has declined from 9.7 % at the end of the second quarter in 2011 to 8,4 %. The lowest vacancy rates are to be found in in Stuttgart with 5.3 % and in Munich with 6.4%, but also in Frankfurt und Düsseldorf, where the vacancy rates are currently the highest with 14.7 % and 10.5 % respectively, the amount of vacant space has declined sharply in comparison with the previous year.
Top rents continue to increase throughout the market
“Compared both with previous years over the longer term and with previous quarters over the short term, in some cases considerable increases in top rents were recorded in most of the cities examined” Andreas Trumpp notes. “The reason for this is to be found in sustained constant lettings in the higher-priced space category, chiefly in central locations”, he adds. Whilst the highest rates of increase compared with a year ago were recorded in Düsseldorf (+9 %) and Stuttgart (+8 %) where rents of € 25.00 /m² and € 20.00/ m² respectively are currently being achieved, the rates of increase in Munich with just about 4 % at € 30.10 m² and Hamburg at € 24.00 /m² or 2 % are somewhat lower. The top rent in Berlin at € 22,00 /m² is in line with that of the previous year. Frankfurt however had to lose some of its shine. In Frankfurt, the top rent at the end of the second quarter of 2012 of € 33.00/m² was 12% below the value of the previous year due to the decline in the number of prime deals concluded during the last few quarters. Average rents too show an upward trend throughout the country. This was most evident in Stuttgart with an increase in the average rent of almost 10 % to € 12.10/m² as well as in Munich (€ 14.77/m²) and Hamburg ((€ 14.60/m²) with an increase in each case of 7 %. Berlin, with an increase of barely 2 % to € 12,50/m² is almost at the previous year’s level as is Düsseldorf where the average declined by a good 1 % to € 13.90/m². Only Frankfurt recorded a trend that was more clearly downward with 7 % (€ 18.68/m²), even though the short-term trend is once more positive in comparison with the previous quarter (up 7 % from € 17.53/m²).
Outlook – continued reduction in vacant property
“Considering the economic environment, the German office letting market has so far put up a very good fight, since, compared over the longer term, the half-yearly result of almost 1.3 million square metres of office space turnover represents a marginally above-average value” Andreas Trumpp sums up. “A particularly positive development that should be emphasised is the reduction in the level of vacant property, that will continue throughout the year”, he adds. The amount of property being sought as well as the rental contract negotiations of which one is aware, continue to allow a marginally above average result to be anticipated over the whole year.