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Two of Germany’s office heavyweights, Berlin and Frankfurt, are pulling sharply apart in 2025 — with one grappling with oversupply and the other fuelled by a banking-driven surge. While both cities face the twin pressures of rising vacancies and subdued new development, underlying dynamics are setting them firmly on different paths.
Firstly, Berlin. The capital city's office market shows early signs of recovery after a bruising period, but fundamentals remain strained. According to Aengevelt Research, office take-up reached around 570,000 m² in 2024, a 6% improvement on the prior year but still 32% below the decade average. For 2025, a modest rise to 600,000 m² is forecast, but early indicators are soft: Q1 2025 take-up was 29% lower year-on-year and 41% below the ten-year quarterly average.
Vacancy rates are climbing steeply. From a critical low of 4.3% a year ago, vacancies have risen to 6.4% on a total stock of 21.7 million m². The supply reserve now exceeds 1.39 million m² and is expected to rise further, fuelled by new completions and lower pre-letting rates. In 2024, only 40% of new office space was pre-let, down sharply from 65% a year earlier.
A key driver behind the rising availability is the tightening stance of banks: speculative developments are largely frozen unless developers can secure 50% or more pre-letting. As a result, the future pipeline is likely to be curtailed sharply after 2025.
Weighted prime rents have remained stable at around €45/m², according to Aengevelt, placing Berlin behind Munich (€55.70/m²) and Frankfurt (€48.50/m²). However, market forces are building that could reshape this stability.
JLL’s latest market analysis highlights Berlin’s acute shortfall in ESG-compliant, modern office stock. By 2030, an additional 1.2 million m² of high-quality space will be needed under the base-case scenario, rising to 2.35 million m² under a dynamic growth scenario. Berlin’s favourable demographics, sector diversity, and strong employment growth are driving latent demand. At the same time, many legacy buildings will not meet future occupier requirements without significant refurbishment or replacement. With construction activity sharply down and financial stress rising among developers, a supply squeeze in the prime segment appears inevitable — with implications for future rental growth and asset polarisation. Frankfurt, however, is telling a very different story.
Frankfurt: Big-ticket deals propel the market
In contrast, Frankfurt’s office market has staged an unexpectedly strong comeback, led by a wave of major leases in the financial sector. Aengevelt reports that while 2024 take-up fell 7% year-on-year to 340,000 m², 2025 is poised for a breakout, with forecast take-up of 480,000 m² — the highest in six years and back in line with the ten-year average.
Momentum has been remarkable: the first quarter of 2025 saw 200,000 m² leased, more than double the ten-year quarterly average. Landmark deals by Commerzbank, ING Germany and others have contributed significantly, with consolidation moves into new towers such as Helaba’s Central Business Tower reshaping the city’s skyline.
Vacancy remains high at 10.7%, with a supply reserve of 1.25 million m², but Aengevelt expects a gradual fall to 9% by year-end if the current leasing pace continues. Central locations are proving particularly resilient. Handelsblatt reports that premium CBD offices are in strong demand, with developers of upcoming high-rises such as the ‘Gloria’ project targeting tenants willing to pay premium rents for new, ESG-compliant space.
Rental growth has accelerated. Weighted prime rents have climbed to €48.50/m², with selected top CBD properties reportedly breaking the €60/m² barrier. Aengevelt forecasts further modest increases for 2025, driven by scarcity of prime stock and limited new deliveries. Completions in 2024 totalled 190,000 m², but are expected to fall again in 2025, exacerbating the imbalance.
Conclusion: Berlin and Frankfurt are both at pivotal moments, but their trajectories are diverging. Berlin faces the dual challenge of digesting a rising supply overhang while upgrading much of its ageing stock to meet ESG and tenant demands. Frankfurt, by contrast, is capitalising on focused premium-location demand, with rents rising and vacancy starting to tighten. For investors, success will hinge not merely on city selection, but on pinpointing micro-locations, securing best-in-class assets, and delivering ESG-compliance — the critical markers for outperformance in a shifting market.