The Munich office leasing market got off to a calm start in 2021 with a take-up of around 102,300 sqm. Companies are still in the process of determining their space requirements. As a result, large leases in particular have failed to materialize recently and take-up has remained around 43% below the previous year's result. Vacancy rates have risen equally in all locations due to the low level of market activity. Year-on-year, 354,000 sqm has been added, which corresponds to a vacancy rate of currently 4.0%. At €20.90/sqm, the average rent has fallen by just under 3% compared with Q1 2020. Hardly any highpriced new leases, as well as rising letting numbers in cheaper locations are responsible for the decline. Due to the new developments coming on the market coupled with low market activity, we expect vacancy to continue to rise in 2021. If demand recovers in the second half of the year, we consider a take-up of 550,000 sqm to be achievable.
Investment
At the end of the first quarter of 2021, the Munich investment market registered a transaction volume of around €518 million. Investors and owners continue to be reserved in their buying and selling decisions in the wake of the pandemic-related uncertainties. As a result, there was no transaction in the triple-digit million range this quarter. National investors continue to dominate the market with a share of 67%. Office properties remain the strongest asset class with around 41%, followed by commercial properties with 25% and hotels with 15%. Yields for office properties are stable in the core sector at 2.70%. Due to the continuing uncertainty on the market, investors are more selective and risk-averse. Thus, around 67% of the transaction volume was achieved in the core and core-plus segment. The expected recovery in the second half of the year should lead to an annual result in the region of €5.5 billion.
