German offices see prime rents rise as vacancy rates fall

According to research by Savills, sustained demand for space in Germany’s six main office markets of Berlin, Dϋsseldorf, Frankfurt, Hamburg, Cologne and Munich combined with low development completion levels in the first half of 2012 pushed the average vacancy rate down to 9.3% in H1 2012, from 10.4% in H1 2011. The firm records the lowest vacancy rate in Berlin, at 5.8%, while Frankfurt has the highest at 14.7%. Savills research shows that as a result of this drop in vacancy rates, office rental levels across these main markets have increased over the past six months, particularly in the prime sector, beating 2011 levels.

Savills data records current prime rents in Hamburg at ?24.40 per sq m per month, up 6% compared with H1 2011, while in Düsseldorf prime rents have risen by 5% and are currently at ?24.70 per sq m per month. In terms of average office rents, Savills notes a marginal decrease (-0.8%) across Germany’s six key markets in H1 2012 compared with H1 2011, recording it at ?14.22 per sq m per month.

Matthias Pink, Head of Research at Savills Germany, says: “With only a few office completions scheduled for the second half of the year we expect to see a further slight drop in vacancy rates as quality stock is taken up keeping rental levels, and particularly prime rents, stable across the country.”

Savills expects take-up across Germany’s office markets to reach approximately 2.8 million sq m by year end, matching the 10-year average almost exactly and marking a decrease of just over 10% year-on-year, following uncharacteristically high take-up levels in H1 2011. In H1 2012 take-up in the six major German office markets totaled approximately 1.38 million sq m, marking a 10.5% decrease compared to the same period in 2011. This average decrease in take-up varies across the key markets from -1% in Hamburg to -29% in Cologne, where the reduction was largely due to a lack of large-scale lettings of over 5,000 sq m, which characterised the first half of 2011.

Robert Kellershohn, Managing Director of Office Agency at Savills Germany, says: “It is not surprising that the strong take-up in 2011, on account of extraordinarily bright economic conditions at that time, would not be repeated this year. Overall German office markets are in good shape with take-up figures in line with the average of preceding years, vacancies on the decrease and rents stable at a high level.”

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