Warnings on looming office shortage in Germany's big cities

Whatever about the shortage of quality office buildings in German cities to meet investors's needs, it's now becoming increasingly difficult for companies, enterprises and even start-ups to find suitable accomodation in the biggest cities, attested to anecdotally by several companies REFIRE has recently spoken to.

Now ZIA, the Zentrale Immobilien-Ausschuss, the leading lobby organisation for the at least 20 real estate interest groups across Germany, is urging the government to pay attention to the needs of commercial project developers as well as residential developers in ensuring that the sudden shortage doesn't strangle cities' urban development plans.

The largest cities – Berlin, Munich, Hamburg, Frankfurt am Main, Düsseldorf, Cologne and Stuttgart – now only have 5% of office accomodation vacant, compared to 10% as recently as 2010. Depending on the definition of 'vacant' and the suitability of much 'available' office space to the needs of modern companies, some cities – such as Munich, Stuttgart and Berlin – are at the 3% level, which is the minimum vacancy level required for office markets to even function. In other words, these cities are efectively full for large new tenancies.

In Berlin the number of office workers has risen in the last five years by 14.2%, according to ZIA's recently-published annual Spring Report. Andreas Schulten, CEO of market research group BulwienGesa and a ZIA committee member, comments: "Office bottlenecks are hampering economic development in the big cities, and government building policies need to look out for more than just residential housing", a sentiment echoed by Berlin Partner, the city's economic development agency.

The ZIA figures show that, for 127 German cities last year 1.84 million sqm of new office building was built, while more than a million sqm were torn down or otherwise converted to non-office use. With tenants not enthusiastic about signing forward lease agreements for yet-to-be-constructed buildings, speculative project development is slow, hence the shortage is not going to be resolved in the immediate future.

New government regulations encouraging more "urban areas" with combined residential, gastronomy, retail, office and cultural buildings closer together, may help to alleviate the problem by loosening the restrictions currently prevailing in designated residential areas.