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Office Space
Since January 2013, prime office rents have risen in all of Germany’s largest cities bar Hamburg.
The lack of supply of prime central office space has pushed the average prime rent in Germany’s six largest cities to €27.70 per sqm., levels not seen since the peak of the dotcom boom in 2001, according to property advisor Savills. The rise in rents is set to slow this year however, due to a higher level of completions.
Since January 2013, prime office rents have risen in all of Germany’s largest cities bar Hamburg, despite a fall in total take-up by 10% on 2012 to 2.78m sqm, according to a new report published by Savills. Berlin, Cologne, Düsseldorf and Frankfurt even recorded increases above 5%. The principal reason for the development was the continued low completion volume, reaching 860,000 sqm. last year, up on the670,000 sqm recorded in 2012,. but still below the five-year average of 1m sqm.
“As a result of the improving economic environment, including on the financing side, construction has started on a number of developments,” said Savills head of research Matthias Pink.“This will boost supply, with the result that we expect 2014 rental levels to rise moderately at best, while vacancy rates should reduce at a slower pace.”
“Many potential occupiers are competing on the few available prime developments, which is placing upward pressure on the achievable rents for these properties,” said Marcus Mornhart, managing directore and head of office agency at Savills Germany. “The real message of 2013, however, is that the German office market took another step towards becoming a landlords’ market. In spite of a decrease in take-up, the vacancy rate reduced by 1bp to 8% on average across the top six markets and, particularly in central locations, tenants are facing an acute shortage of space. This has resulted in occupiers favouring decisions to renew existing leases.”
Savills expects take-up to rise this year, boosted by improved economic dynamics in Germany and Europe. “Particularly major occupiers, who have been reluctant to make relocation decisions in 2013, are set to play a more significant role again this year so that we believe an annual total take-up of at least 2.9m sqm. is realistic,” said the report. – a figure which would be more closely aligned with the 10-year average.