Office rents in Berlin outstrip Munich

Office rents in Berlin now outstrip those in Munich, according to research published this month by German network of property service providers, German Property Partners (GPP).

Average office rents in Berlin in the first half of the year reached €17.10 per sqm/month, an increase of 10%. Rents in Munich increased by 4% in the period to €16.60 per sqm/month. Average office rents increased in almost all Top 7 markets, including rises of 10% in Stuttgart, 6% in Frankfurt and 5% in Düsseldorf. Rents fell by 1% in Hamburg to €14.80 per sqm/month.

‘With record results from Hamburg and Berlin plus very good letting figures in the other five cities, the Top 7 returned take-up that was even higher than the half-year result in 2016,’ said GPP spokesman Björn Holzwarth.

However, it is not the first time that rents in Berlin have outstripped those in Munich, Holzwarth told REFIRE: ‘Actually, at the end of 2016, average rents in Berlin hovered around €16.10 per sqm/month, compared to €15.50 in Munich.’

The spike in rents in Berlin has been driven by new levels of take-up, according to German Property Partners. In the first six months of 2017, there was a 34% rise in take-up to 410,000 sqm, the highest figure in the past 10 years. Big lettings included online retailer Zalando taking 34,000 sqm of office space on Cuvrystr. 51, according to Holzwarth. In addition, there were 15 lettings in Berlin the first six months of 5,000 sqm and four of 10,000 sqm, he said.

Despite the slight drop in rents, Hamburg’s take-up increased by 25% in the period to 300,000 sqm, largely as the result of big lets, including Olympus Deutschland renting 34,500 sqm for its new headquarters in the planned new build in City South. There were six lettings above 5,000 sqm in the period, according to Holzwarth, which is 50,000 sqm more than last year.

Premium rents witnessed even sharper increases. Berlin’s premium rents hit €28.50 per sqm/month, a rise of 14%. In Hamburg, they increased by 8% to €26.50 per sqm/month. In Stuttgart, they rose by 5% to €24 per sqm/month. However, Frankfurt’s premium rents are the most expensive, at €39 per sqm/month, a rise of 3%, compared to prime rents of €33.50 per sqm/month in Munich, representing a slight drop of 3%.

Vacancy rates have also hit a new all-time low, at just 4.9% in the Top 7, down 0.9% on the previous year. ‘Each of the top 7 cities is, without exception, affected by diminishing levels of empty space,’ said Holzwarth. ‘The vacancy rates in Stuttgart and Berlin at 2.7% and 2.9%, respectively, have hit all-time lows and in the medium term serve to fuel rent increases in the fiercely contested market for offices.’

The estimated volume of completions for 2017 and 2018 is around 2.03m sqm spread over around 200 new developments, according to GPP. As in previous surveys, the highest levels of new build activity are found in Berlin and Hamburg.