Office Letting
Berlin posted 193,000 sqm of office take-up in Q1 2021. The result reflects just shy of a 60% increase compared to the weak previous-year result and exceeds the 10-year average by 23%. A number of large-scale leases signed for over 10,000 sqm and totalling at almost 80,000 sqm dominated market activity. The vacancy rate continued to rise slightly as expected, settling in at a still very low 2.0%, up 80 bps yoy. Although some companies are starting to offer space for sublet, subletting activity has yet to play a significant role on the market. We are seeing changes in Berlin office rents resulting from the effects of the Covid-19 pandemic for the first time. Prime rents were down less than 1% at the end of March 2020 to a current €39.70 per sqm. Average rents are currently posting €28.00 per sqm, up 3% compared to March 2020. Compared to year-end 2020, prime rents have fallen 3.5% with average rents down 2.5%. Despite the Covid19 pandemic, the Berlin market got off to a strong start moving into 2021 with substantial deals being signed. Based on current activity, 800,000 sqm in take-up is a realistic annual result for 2021.
Investment
The Berlin commercial real estate market experienced a quiet first quarter with a transaction volume of €1.1bn. The lack of large-volume deals as well as prolonged analyses before buying assets contributed to the calm market environment. Office properties were the most sought-after asset class, especially in secondary and city margins submarkets. Prime yields remained stable quarter-on-quarter. National investors dominated the market activity and dominated the buyside with 73%. International investors are expected to return to the market in the course of the year. The hope of a rapid vaccination progress and a swift normalisation meets a well-stocked deal pipeline, which will allow for a much more dynamic transaction activity in the upcoming months. Previous year‘s result of €8.5 bn will be met in any case, so that a year-end result of €9bn seems realistic.
