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The German office rental market in 2024 displayed a nuanced recovery, characterised by a modest increase in space take-up and rising prime rents despite mounting vacancies and economic headwinds. Reports from Cushman & Wakefield, Colliers, and CBRE, among others, underline the market’s resilience, driven by a growing preference for high-quality spaces in central business districts (CBDs) and a resurgence in large-scale deals.
Office space take-up in the top five markets—Berlin, Düsseldorf, Frankfurt, Hamburg, and Munich—reached 2.14 million square metres in 2024, a 4% increase over the previous year, according to Cushman & Wakefield. However, this figure remains 20% below the five-year average, reflecting the ongoing difficulties posed by economic uncertainty and the shift towards hybrid working models.
Performance varied significantly by city. Munich led the pack with a remarkable 29% increase in take-up, driven by a surge in deals over 10,000 square metres. Berlin remained stable with a 2% rise, while Hamburg and Frankfurt saw minor declines of 5% and 3%, respectively. Düsseldorf experienced the steepest drop, with take-up falling by 15%. CBRE corroborates these findings, highlighting Munich’s leadership with a total of 626,000 square metres transacted, followed by Berlin at 612,000 square metres.
Large-scale transactions were a bright spot, with 23 deals exceeding 10,000 square metres concluded in 2024, up from 12 the previous year. Notable examples include the City of Hamburg’s acquisition of the HCOB headquarters at Gerhart-Hauptmann-Platz, spanning 26,000 square metres, primarily as an owner-occupier move rather than a typical leasing transaction.
Vacancies increase as supply outstrips demand
Vacancies across the top five markets rose to 8.2% by the end of 2024, an increase of 1.3 percentage points compared to the previous year. Düsseldorf recorded the highest vacancy rate at 10.5%, while Hamburg maintained the lowest at 5.5%. Sublease space availability also grew, reaching 642,000 square metres in Q4 2024.
Looking ahead, the vacancy rate is expected to rise further to 8.8% in 2025, as new completions outstrip demand. Approximately 1.4 million square metres of new office space is slated for delivery in 2025, following 1.2 million square metres completed in 2024. Berlin accounted for more than half of 2024’s completions, with 650,000 square metres entering the market.
Despite rising vacancies, prime rents increased across six of the top seven markets in 2024. Munich led the charge with a 12.8% rise to €53 per square metre, followed by Düsseldorf and Stuttgart, which saw increases of 8% and 6%, respectively. CBRE reports Munich’s prime rents reaching an even higher €57 per square metre, emphasising the city’s appeal.
Average rents showed a mixed trend. While Frankfurt and Munich recorded modest gains of €2.45 and €1.25 per square metre, respectively, rents in Hamburg and Berlin remained stable. Düsseldorf experienced a decline, with average rents dropping by €1.30 per square metre.
Carsten Ape, Head of Office at CBRE Germany, notes a “flight to quality” among tenants, with demand focused on modern, ESG-compliant properties in central locations. “User demand was concentrated on high-quality office properties in the central CBD locations of the top five markets,” he explains.
Public sector accounts for 18% of total take-up
Corporate demand remained subdued in 2024, with the manufacturing and IT sectors seeing notable declines. However, the public sector emerged as a stabilising force, accounting for 18% of total take-up. High-profile leases included the state capital Stuttgart’s refurbishment project (26,000 square metres) and the City of Cologne’s new construction project of similar size, illustrating the public sector's critical role in stabilising demand. Public sector activity is expected to remain a key driver in 2025, with further large-scale leases anticipated in major urban centres. Colliers expects the public sector to continue driving demand in 2025.
The German office rental market faces persistent difficulties, including dampened economic growth, high construction costs, and rising interest rates. Additionally, the shift to hybrid working models continues to impact space requirements, as companies consolidate portfolios and seek greater flexibility.
Despite these hurdles, opportunities are still plentiful. Adaptive reuse projects and office-to-residential conversions are gaining traction, particularly for older buildings in peripheral locations. Developers are also focusing on modernising existing stock to meet ESG standards and tenant expectations. CBRE’s Jan Linsin predicts a gradual decline in new-build supply, which could tighten the market for prime spaces in the medium term.
While a significant market recovery remains unlikely this year, signs of stabilisation are emerging. Take-up is projected to increase by up to 8% in 2025, reaching 2.3 million square metres. Prime rents are expected to continue their upward trajectory, supported by limited supply of high-quality spaces. However, vacancy rates will likely rise further as new completions hit the market.
Linsin summarises, “The peak of the cyclical vacancy rate expansion will be reached in 2025. With improved demand dynamics and declining new construction activity, we anticipate a gradual rebalancing of the market.” For institutional investors, the German office market presents opportunities for those focused on prime locations and high-quality, ESG-compliant assets, would seem to be the clear message.