Top six German office lettings markets in 2017

05 January 2018

2017 witnessed record take-up and rising rents as co-working space operators leased six times more space than in the previous year

  • Double-digit increase in take-up compared with the strong previous year to 3.85 million sq m
  • Prime and average rents increased by 1.6% and 1.3% respectively
  • Vacancy rate fell by 20 basis points to 5.1%
  • In view of the supply shortage, rents will rise further in 2018

The top six German office lettings markets posted a record year in 2017 in terms of take-up. The total rose by more than 11% to 3.85 million sq m. With a prime rent of €30.28 and an average rent of €16.53, rents are at their highest levels for more than 15 years. The vacancy rate of 5.1% is lower than at any time since the turn of the millennium. “Tenants have been reacting to the market situation and increasingly taking pre-lets in developments or even developing their own properties. We are also seeing an increase in lettings in peripheral locations or lower quality buildings,” says Marcus Mornhart, Managing Director and Head of Agency Germany for Savills, on the behaviour of market participants. “Consequently, it comes as little surprise that rents increased significantly once again during the course of the year,” adds Mornhart. Prime rents increased in Berlin, Düsseldorf and Munich, in some cases materially, and remained stable in the three remaining markets. Average rents also rose across all markets with the exception of Frankfurt and Hamburg.

Operators of co-working spaces and serviced offices made a not insignificant contribution to both the increasing supply shortage and rental increases. Across the top six markets, national and international operators leased more than 160,000 sq m, which was six times more than in the previous year. Such occupiers accounted for more than 4% of overall take-up in 2017. These were particularly active in Berlin, leasing ten offices with a total area of 58,000 sq m, Hamburg (twelve lettings totalling 42,000 sq m) and Munich (nine lettings totalling 23,000 sq m). Lettings were distributed across prime locations, good B-locations and creative districts. The average rent on such space across the top six markets stood at €19.50. “Co-working spaces are enjoying increasing acceptance from both occupiers and property owners and are growing rapidly. Their growth is currently only restricted by the lack of suitable office space, which is not only an issue for operators of co-working spaces but also for any occupier seeking high-quality office space,” says Matthias Pink, Director and Head of Research Germany for Savills.

Vacancy rates of 2% in Berlin, 3.3% in Munich and 4.8% in Cologne underline the supply shortage. In Hamburg (5%), Düsseldorf (7.4%) and Frankfurt (8.1%), vacancy rates have also fallen significantly in recent years. “The bad news for office occupiers is that availability will contract further in 2018 and rents will continue to rise,” says Mornhart. “The good news is that, at least in Berlin, Cologne and Munich, development activity will be higher in 2018 and 2019 than in 2017, greater than the ten-year average and is likely to increase availability in those cities. In Frankfurt and Hamburg, occupiers will have to wait until 2020,” adds Mornhart. Savills expects the prime rent across the top six cities to rise by an average of 3.8% in 2018 (2017: 1.6%). Rents in good B-locations are likely to see somewhat higher growth.

 
 

General Enquiries

Berlin

 

Key Contacts

Marcus Mornhart

Marcus Mornhart

Director
Agency

Frankfurt

+49 69 273 000 70

 

Matthias Pink

Matthias Pink

Director / Head of Research Germany
Research

Berlin

+49 30 726 165 134