A new report published by Berliner Sparkasse and researchers Bulwiengesa on the Berlin office market shows that office space is still very scarce in the capital, with peak rents rising 15% or €5.00 on a year ago. The figures relate to the first quarter, largely excluding the corona lockdown period, but they are likely to represent a still accurate picture.
In the first three months of the year, new office leases signed amounted to 135,000 sqm, a good 50% less than in the same period last year. The vacancy rate remains at 1.3%, meaning the market is effectively fully let.
Top office rents rose to €39.50 per sqm (per month), 15% higher than last year. The net initial yield remains at 2.6%.
Marcus Buder, head of commercial real estate financing at Berliner Sparkasse, said: "Because the office stock is almost fully let and there is a lack of vacant building space, the Berlin office market has had its weakest start to the year since 2016. The Covid 19 pandemic did not have a decisive influence on the low take-up of space. We expect to see its impact on the Berlin office letting market coming through in the third and fourth quarters of 2020".
The shortage of office space in Berlin itself and rising rent levels are bringing the attractions of the surrounding hinterland into focus, and the report focuses on developments in Berlin’s suburban areas. Central to this are major projects such as the opening of the Berlin-Brandenburg airport – BER, now scheduled to open at end-October 2020 - and the opening of the Tesla Giga-Factory in Grünheide, to the south-east of Berlin. These are large-volume construction projects that will lead to new jobs and further growth, and will impact the office and residential market in the Berlin suburbs.
In the area surrounding BER Airport, for example, construction work is expected to reach around 80,000 sqm of office space per year by 2024. Examples are the projects "Green Gates" with 35,000 sqm or "Mizar - Office Gate" with 18,000 sqm. By way of comparison: In the past five years, only 6,000 square meters of office space have been realized in the area.
While the area immediately surrounding the airport will consist mainly of offices and hotel properties, no other area of Berlin is likely to see as much new residential construction by 2024 as in Schönefeld, with a broad mix of living and working now on countless development plans. New logistics properties will also certainly be in demand.
Back in Berlin itself, many eyes are on the outcome of a major €300m value-add office complex sale in Berlin Schöneberg’s Potsdamer Strasse, near the Heinrich-von-Kleist Park close to the border with the Charlottenburg district. The sale is being viewed as a bellwether for the state of the city’s office market after three month of COVID-19 lockdown.
The Heinrich, a group of four buildings belonging to Vivion Investments, the family vehicle of Israeli businessman Amir Dayan, is being marketed by CBRE with a €300m price tag. One of the buildings is empty, while the other three are mixed-tenanted including co-working office space.
The Luxembourg-based Vivion holds a 51.5% stake in Golden Capital Partners, whose other key partners are the Canadian pension fund Ivanhoe Cambridge and several Israeli funds. Vivion owns more than €2bn of office buildings in Germany and the Netherlands, and more than 50 hotels in Europe, including prestigious London hotel names, valued at a further €2bn. The Dayan family also own the €3.2bn TLG Immobilien AG, recently sold to Aroundtown, now the third-largest listed real estate company in Europe.
