Tobias Seiler, Research Analyst at Colliers International Munich: “ The take-up increase is to the greatest extent due to large-scale leases for example by BrainLab at Neue Messe Riem, however, this must not hide the fact that tenants remain hesitant concerning to new leases and relocations in other segments.” In the size segment of spaces starting at 5,000 sq. m an increase by 47% to 74,200 sq. m was recorded. However the small- and mid-sized segments up to 2,000 sq. m could not reach the results of the respective quarter in 2013. A decrease by approx. one third was realized. Only the second largest size segment (2,001 to 5,000 sq. m) noted a significant gain of 42% to 27,200 sq. m.

Annual Comparison shows further rise in average rent – prime rent reaches ten-year high.

The costs for renting office spaces in the Bavarian capital have risen further. The space weighted average rent increased by 6.3% to € 15.23/sq. m compared to last year. “Particularly the historic city center and the single submarkets within Mittlerer Ring experienced rent increases of partly more than 7%, which are due to the continuing demand for modern office spaces at good locations.” explains Seiler. The average rent in the remaining city locations mainly increased, while it slightly decreased by 2.8% to € 9.79/sq. m in the suburbs as single large-scale leases were concluded with low rent levels.

Also the prime rent rose as expected. Small office spaces with high-quality fit-out cost resulting in € 33.30/sq. m, exceeded significantly in part by individual exceptions to the rule. Hence the prime rent climbed by 7.4% to a new ten-year high.

No changes in vacancy

The vacancy in Munich has been stable for over one year now. At the end of March the vacancy rate for office properties was calculated at 5.8% which equals the previous year’s result. By the middle of the year only round 8,400 sq. m of available office space will come on the market. Seiler: “Currently the market holds approx. 1.3 million sq. m office space ready to move into within 3 months, approx. one third of which can be labeled with limited marketability.” Only minor changes of this situation are expected during the coming quarters and a stable or slightly declining vacancy level can be assumed.

Conclusion and Forecast

Despite the good take-up, small- and mid-sized space segments need to catch up. Characteristic for the first three months was a change in the composition of the take-up, as large-scale tenants regained their driving position in turnover. The development of the average and prime rent met expectations and the stability of vacancy rates came at no big surprise. “A recovery across the market cannot be recognized by quarterly results, however the large-scale leases send a positive signal for the development in the course of the year” Peter Bigelmaier, Managing Director at Colliers International Munich sums up. “In the last years the first quarter has always ranked among the weak quarters of the respective year, so that we are very comfortable with the achieved result.” he adds. Colliers International expects a total take-up of 550,000 sq. m by the end of the year.

Fast Facts - Office Letting Q1 2014

Take-up: 161,300 sq. m (+4 % compared to Q1 2013)

Turnover: 158,500 sq. m (+21 % compared to Q1 2013)

Prime rent: € 33.30/sq. m (+7.4 % compared to Q1 2013)

Average rent: € 15.23/sq. m (+6.3 % compared to Q1 2013)

Vacancy rate: 5.8 % (unchanged compared to Q1 2013)

Stock (+suburbs): 22.77 million sq. m