It shouldn't - and doesn't - come as a surprise, despite many companies across Germany protesting that, despite corona, they haven't lowered their office space needs in any way. The statistics tell a different story, which is that office vacancies grew last year by 1.2m sqm, following a similar rise in vacancies in 2020, the first year of the pandemic.
Taken together, this marks a trend reversal after years of a steady reduction in the vacancy rate in Germany's top office markets. The broker partnership Deutsche Immobilien Partnership (DIP), under the leadership of Düsseldorf-headquartered Aengevelt Immobilien, has just produced a fresh analysis of the 16 main German office markets where itself and the DIP's regional members offer coverage. It finds that the so-called total supply reserve (i.e. actively marketable office space) rose last year by 1.2m sqm to its current 5.39m sqm, or a 1% rise to now 4.6%.
In 11 of the 16 office markets surveyed, the supply of office space increased while four saw a shrinkage of available space - Bremen (minus 3,000 sqm), Magdeburg (4,000 sqm), Leipzig (15,000 sqm) and Dresden (down 35,000 sqm). Freiburg remained effectively unchanged.
Among the big cities, Munich's vacancy rate rose by 340,000 sqm, Berlin's rose by 300,000 sqm, while perennial vacancy rate leader Frankfurt saw its empty spaces increase by 220,000 to 1.03m sqm.
Paradoxically, a number of cities still saw an actually higher rate of office take-up. The explanation is, of course, that new supply from new completion might have helped to fuel the vacancy rate rise. So office take-up including owner-occupiers across the DIP-serviced region rose 13% from 3.4m sqm to 3.9m sqm. However, it still remained 4% below the average value for the previous ten years.
Peak rents - the measure so beloved of brokers in describing the small niche at the top of the market that is much slower to move - rose slightly over the period and all markets to a weighted level of €32.85, up from the previous year's €31.20.
The upward trend in peak rent was noted in Berlin, Bremen, Dresden, Essen, Frankfurt, Freiburg, Hamburg, Cologne, Leipzig and Munich. Other big markets such as Düsseldorf, Hanover, Magdeburg, Nuremberg and Stuttgart all held steady, while Karlsruhe booked a downward trend, from €15.00 to €13.50.
The message from these figures broadly corresponds to the market analysis presented on the office markets by the recent government-appointed Wise Men in their annual "State of the Union" round-up of the health of the property markets.
They concluded that demand, at least for top office space, would remain robust. ""After all these discussions about cutting back on space, it's becoming ever clearer that the office will remain the centre of work organisation for most companies," they stated. Still, office landlords are being forced to re-think their previous space concepts, and they'll need to brace themselves for not insignificant additional investment at the latest when it comes to the re-letting phase.
Meanwhile, REFIRE's attention was grabbed by a just-released study by Berlin-based 21st Real Estate, which uses web-based data-gathering techniques to evaluate real estate.
Their data shows that the share of cities and municipalities across Germany in which the office property markets are signalling a bubble developing has risen for the fifth quarter in a row. The barometer reading in Q4-2021 indicated that 12.1% of the cities surveyed were showing bubble characteristics, an increase of 1.6% over the previous quarter.
Compared to a year previously, however, it had risen from a mere 2.9% of cities, using the same methodology. However, Düsseldorf would appear to be alone among the big cities in giving off these bubble warning signals - with 21st Real Estate suggesting that the bubble risk is - for the moment - highest mainly in the "rather small office markets" outside the Big 7. We'll continue to track it.