The Frankfurt office leasing market exceeded the previous year’s result by around 11,000 sqm, or 16%, thanks to the owner-occupier deal signed by Siemens for 15,000 sqm located at the Gateway Gardens development site. Activity remained calm overall in Q1 2021, however, with just 95 deals signed. The vacancy rate increased slightly compared to the end of the year to around 831,000 sqm, around 11% of which involved subletting. Further increases are to be expected in certain submarkets. Thanks to large-scale leases signed for space at high-rise properties in 2020, headline rents remain high, even though the drop in demand can already be seen in the intensification of incentive packages. As such, the Covid-19 pandemic continues to leave its mark on the Frankfurt market. Nevertheless, many companies are already making long-term postpandemic plans, which is likely to drive take-up over the course of the year.
The investment market experienced a calm start to the year with transaction volume at roughly €860m. This reflects a sharp decline yoy, which can be traced back to the previous year’s record Q1 result due to the TLG-Aroundtown merger. With just two deals signed for over €100m, we did not see another wave of the large number of high-volume landmark deals recorded during the 2020 end-of-year rally. The number of transactions across all risk classes nevertheless confirms the optimistic market sentiment. Whereas a growing number of promising office properties with repositioning potential located in secondary locations are changing hands, core and core+ products only generated a quarter of transaction volume due to limited supply. Despite attractive general conditions and a well-stocked deal pipeline, it remains to be seen when the required liquidity and competitive pressure will materialize beyond the stable core segment due to the uncertain course of the pandemic and pessimistic economic growth forecasts.