October 1, 2012, Munich – In the six major markets for office space in Germany – Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart – about 1.99 million m² of office space was newly leased by tenants or occupied by owner-occupants by the end of the third quarter. “That works out to a decrease of just under ten percent by comparison to the previous year,” says Andreas Trumpp, Head of Research at Colliers International, Germany. “It should be noted, though, that take-up figures in 2011 were above average. In addition, the total figure for the third quarter was 712,500 square meters, making it the strongest quarter yet this year in terms of take-up,” Trumpp adds. The majority of the decrease in take-up of space is due to reluctance on the part of owner-occupants. Leasing take-up alone slid by only some four percent year on year, closing the third quarter at approximately 1.88 million m².

Berlin the only market with an increase in take-up
Despite the livelier activity on the market in the third quarter, take-up of space was down in five of the six office markets surveyed. The only market to see an increase was Berlin, the nation’s capital, where the figure was up some 5% year on year, at 478,300 m². The Düsseldorf office market held largely steady with a slight decline of 3%, to 208,000 m², as did the Frankfurt market, where take-up was down 4%, to 331,100 m². “The slide was steeper in the other three cities, by contrast, but that is attributable to the fact that the comparison figures for last year were above average,” Trumpp explains. The clearest decrease, but an expected one in light of the fact that 2011 was a record year, was thus the 27% decline in Stuttgart, where total take-up of space was at 151,100 m². In the segment of spaces over 5,000 m², nearly 50,000 m² less was leased in this market than in 2011. In Munich, where take-up of office space stood at 513,600 m², the decrease came to nearly 14%, also due to fact that there were fewer large-scale leases than last year, when the market performed very well. Total take-up of space in Hamburg was also down significantly year on year, at 310,000 m², a decrease of 18%. Figures for Hamburg in 2011 included one new lease agreement for approximately 45,000 m². No comparable signings have been recorded so far in 2012.

Decline in vacancies still noticeable
With take-up of space in general, and especially leasing take-up, still slightly above average even as completion figures remain low, the year-on-year decline in vacancies turned out to be significant, at about 13%. In all, just under 6.6 million m² of office space was vacant at the end of the third quarter, for an average vacancy rate of 8.2%. “In comparison to the quarter just before, as well, the stock of office space available for occupancy in the short term has decreased by a significant measure once again,” Trumpp points out. Within three months, vacancies in the six major centers of office leasing activity declined by 125,200 m² overall. The lowest vacancy rates were noted in Stuttgart, at 5.4%, and Munich, at 6.2%; the highest were recorded in Frankfurt, at 14.1%, and Düsseldorf, at 11.2%. “In both cities, but in Frankfurt especially, the downward trend also seems to be continuing,” Trumpp says. In Frankfurt, a major banking industry center, the vacancy rate fell by a noteworthy 240 base points within 12 months.

Prime and average rents rising overall
With one exception, prime rents rose year on year, in some cases by a considerable measure. In Frankfurt, the relatively low number of high-priced leases signed in comparison to last year was responsible for prime rents sliding by 8% compared with the third quarter of 2011, to a current level of € 33.00/m². “Based on a number of large-scale leases signed in the premium segment, the increase in the prime rent was most pronounced in Düsseldorf, where the figure rose 11 percent, to € 25.00/m², followed by Stuttgart, where the new prime rent was at € 19.80/m², an increase of seven percent compared to last year,” Trumpp says. Slight increases were also observed in Munich (+4%, to € 30.50/m²) and Hamburg (+2%, to € 24.00/m²). In Berlin, the prime rent stood at € 22.00/m², the same as last year. A short-term comparison with the immediately preceding quarter showed no change at all or merely marginal change, registering about +1% in Munich and -1% in Stuttgart. Average rents rose year on year, especially in Munich (+10%, to € 15.07/m²) and Stuttgart (+8%, to € 12.00/m²), the markets with the lowest vacancy rates. Slight increases were also noted in Berlin (+4%, to € 13.10/m²) and Hamburg (+3%, to € 14.30/m²), while slight declines came in Düsseldorf (-1%, to € 13.80/m²) and Frankfurt (-4%, to € 18.00/m²).

Outlook – vacancies expected to continue to decline as new request volumes also slide
At just under 2 million m² in take-up of space, the total on the German market for office space at the closing of the third quarter was slightly above the long-term average, so the figure remains very stable. One particularly noteworthy development in this context is the continued decline in vacancies. “Despite the fact that new request volumes are now declining from the high level seen in 2011, we still expect the final figure for take-up of space in 2012 to be slightly above the long-term average, at about 2.6 million square meters. For 2013, by contrast, we expect comparatively lower take-up figures. At the same time, we assume that vacancies will continue to decline due to low completion figures, although at a slower rate,” Trumpp concludes