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Germany’s volume of vacant office space is approaching a record, yet a company seeking 3,000 sqm of modern premises in central Frankfurt may have only four realistic options. That contradiction, set out by JLL at its latest German office-market briefing, says considerably more about the market than the national vacancy figure alone.
Office vacancy across Germany's seven major office markets stands at around 8.5%. In absolute terms, the amount of empty space is heading towards its highest level in JLL’s series, which stretches back to 2002, although the rate remains below earlier peaks because the total office stock has grown. Sublease space, which increased sharply as companies adjusted to hybrid working from 2022, is also beginning to decline.
Much of the remaining vacancy is in buildings or locations that no longer meet occupiers’ requirements. Miguel Rodriguez, JLL’s head of office leasing, illustrated the problem with a current Frankfurt search. A tenant seeking 3,000 sqm with a 12-month lead time begins with an apparent 1.2m sqm of vacant space. Restricting the search to the CBD and Messe submarkets reduces that to approximately 27% of the total.
Fourteen CBD buildings can initially provide a contiguous area of the required size. Eight offer no meaningful improvement on the tenant’s existing premises; of the remaining six, five are already in advanced negotiations. The result is one genuinely available CBD option. A similar exercise around Messe reduces twelve possibilities to three.
One Frankfurt occupier seeking more than 5,000 sqm has consequently begun deciding whether to renew or relocate four-and-a-half years before its lease expires, specifically to preserve access to the limited number of suitable buildings.
Vacant space rises as genuine choice contracts
The shortage is occurring as the leasing market shows tentative signs of improvement. JLL expects German office take-up to increase by approximately 7% this year, supported by a stable leasing pipeline and several large transactions.
BVG’s approximately 40,000-sqm lease at Berlin’s RE(O) Campus near Ostkreuz is Germany’s largest office letting this year and Berlin’s largest since 2020. In Düsseldorf, Uniper has agreed to take around 36,500 sqm at the planned NEW HEART tower at Kennedydamm. The two transactions show that major occupiers remain willing to make substantial commitments despite broader economic uncertainty.
For owners, Rodriguez described the position as a fork in the road. They can accept the impairment and dispose of a building that cannot compete, consider an alternative use, or find the capital needed to reposition it into the quality category tenants are seeking. JLL has recently been approached by institutional investors, including some with insurance-sector backgrounds, seeking to identify portfolio assets worth upgrading.
That remains an early signal rather than an established investment trend. But it suggests some owners recognise that high overall vacancy does not remove the case for selective capital expenditure. The opportunity lies in producing the right space before the development pipeline recovers; the danger is spending heavily on an asset whose location or structure prevents it from becoming competitive.
Leasing strength has not restored investment liquidity
The investment market remains considerably less convincing. Bernhard Grabowski, JLL’s senior team leader for office investment, summarised the impasse neatly: “Keiner kauft, weil keiner kauft”—nobody is buying because nobody is buying.
JLL’s conversations suggest that investors are interested in returning to German offices at lower entry prices, but few want to move first and risk establishing the wrong valuation benchmark. As Grabowski observed, if nobody is prepared to be first, nobody can become the second buyer either.
JLL forecasts approximately €7bn of German office investment in 2026, following slightly more than €3bn in the first half. The principal obstruction is not a collapse in occupier demand but the relationship between pricing and financing costs. Rising bond and swap rates interrupted the stronger investment interest JLL had observed before the Iran conflict.
During the zero-rate period, abundant liquidity allowed sellers and advisers to pursue the maximum price. Today, Grabowski argues, the task has reversed: prices are largely constrained by interest rates, leaving advisers to secure the greatest possible liquidity and transaction certainty within that range.
Nor does JLL expect investors waiting for a wholesale collapse to be rewarded. Prime occupier markets remain too stable, and suitable space is becoming too scarce, to assume good offices will soon become indiscriminately cheap. Secondary buildings in weaker locations face a different future, including write-downs, conversion or obsolescence.
A live poll captured the uncertainty: 47% of respondents expected the office market to move sideways during the second half, 28% were sceptical and only 25% expressed some degree of optimism. It was not a scientific survey, but it reflected a market receiving markedly different signals from its occupier and investment sides.
REFIRE: Germany’s office market is not short of vacant buildings; it is becoming short of the buildings larger tenants actually want. Ordinarily, that scarcity and the prospect of stronger prime rents would begin drawing investment capital back into the market. Higher financing costs and uncertainty over pricing are preventing that transmission for now.
The opportunity lies with owners able to create modern space before the pipeline recovers. The risk lies with those mistaking an 8.5% vacancy rate for evidence that every empty office still has a market.