In regard to the take-up Munich’s image of being a solid rock continues on from last year. “Contrary to the expected slow-down in demand, 155,100 m² of office space was leased, which is a plus of round 19% compared with the results after the first quarter of last year. This sends a positive signal to the market.” says Tobias Seiler, Research Analyst at Colliers International Munich. Owner occupiers accounted for almost 27,000 m², so that the absolute lease take-up amounted to 128,400 m² (+10.1%). While large-scale leases were nearly non-existent during the first quarter of the previous year, almost one quarter of the total take-up was generated in this size segment during the first three months of the current year. Also the segment of small-sized leases of up to 1,000 m² gained drive and accounted for 49% of the take-up. In total the take-up in this segment increased by roughly 20%. Only the segment of medium-scale leases between 1,001-5,000 m² has not yet gained momentum  and is lagging behind  the previous year’s results. Take-up dropped in this size segment by 41%.

Rent increase in the Center of Munich, lateral movement towards locations in other districts
 
The rent prices in central locations continue to be on the rise. Particularly concerned are locations within the “Altstadtring”, where the average space weighted rent price rose by 5.1% to € 26.90/m². Owing to high-priced lease contracts, the average rent in the northern central locations in the Schwabing and Bogenhausen districts also increased by up to 10.7%. The remaining central and other district locations show lateral movement or a slightly decreasing average rent, whereas the rents in the suburban areas extensively lessened. Altogether the rent prices in the total market average € 14.33/m² and is round 3.0% below the previous year’s value. The shortage of office space supply has a price-enhancing effect on the one hand and on the other hand the low number of new building completions limits the number of lease contracts for spaces in new buildings with normally above-average rent prices. Due to conclusions of high-priced lease contracts, the prices within Altstadtring continue to increase and peak at € 31.00/m² in the first quarter, which is a rise by 4% compared to the previous year, as seen in the course of the year.

 

Vacancy rate

The low level of new building completions has still greatly impacted the development of the vacancy rate. It decreased by 100 basis points during the past 12 months and ranges at 5.8%. The vacancy could be reduced in the city area (-90 bp) as well as in the suburban areas (-120 bp) to currently 5.1% and 8.3% respectively. Regarding the coming quarters a lateral movement can be assumed by trend. This relates to the fact that, while the number of spaces in new buildings, which will come on the market during the next months, will still remain manageable, stock spaces will become available for rent on short notice until the end of the year. “Generally this can been seen as a healthy development of the vacancy rate, but we are looking towards a shortage of large-scale new buildings in central locations, which may relax again only in the second half of the next year.” Tobias Seiler explains.

Conclusion and forecast

„Once more the demand on the Munich real estate market demonstrates stability, the very size of the market leads to brisk take-up activities.” says Peter Bigelmaier, Managing Partner at Colliers International Munich. “The demand for new building spaces within the city area is still strong, which has led to project developers pursuing their plans for speculative new building projects more intensely again.” he adds. In central locations a further increase of average and premium rents can be assumed, while a stable development is expected in the remaining city areas. Though the volume of new inquiries about office spaces diminished considerably, an augmentation of sustainable requests can be recorded especially in the medium and large-scale segments. According to this the “shock and awe” which had been expected against this background did not occur. Despite this positive kick-off, we assume that by the end of the year a take-up of approximately 600,000 m² will be generated which will barely reach 2012 results.


Fast facts office leases Q1 2013
Take-up:    155,100 m² (+19% compared to Q1 2012)
Lease take-up:    128,400 m² (+10% compared to Q1 2012)
Premium rent:    31.00 €/m² (+1.00 € compared to Q1 2012)
Average rent:    14.33 €/m² (-0.44 € compared to Q1 2012)
Vacancy rate:    5.8 % (-100 bp compared to Q1 2012)
Stock (incl. suburbs): 22.58 million m