German office rents remain stable despite rising vacancy rates

Take-up in the top six German office markets of Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg and Munich totalled 1.2 million sq m in the first half of 2021, according to Savills. 

This is in line with take-up in the corresponding period last year but is one third below the figure from the first half of 2019.
Average vacancy rates across the top six office markets rose moderately to 3.9 per cent. This is 10 basis points higher than in the previous quarter and 70 basis points higher than in the corresponding period last year. However, rents remained stable compared with last year. While the prime rent fell by 0.4 per cent to EUR35.28 per sq m, the median rent rose by 0.5 per cent to EUR17.71 per sq m.
“The German office market remains characterised by a great deal of uncertainty. The majority of occupiers are reticent when it comes to leasing decisions as they are currently still unable to assess how remote working will change the nature of working together going forwards. Many companies have already decided that they would like to implement a hybrid working model. However, they are not yet able to determine what that will mean for the nature of their future office space or how much office space they will require,” says Jan-Niklas Rotberg, Savills Head of Office Agency Germany.
Over the next three years, approximately 5.4 million sq m of office space will be completed in the top six office markets, according to Savills. This equates to around 1.8 million sq m per year, which is approximately 60 per cent above the five-year average. The strongest growth in office supply will be in Berlin. Approximately 2.44 million sq m of space is scheduled for completion in the German capital between 2021 and 2023, which is 90 per cent more than was completed between 2018 and 2020. Around 38 per cent of this is pre-let, which is lower than in recent years. Nevertheless, nominal rents have remained stable in Berlin and elsewhere.
“We expect take-up over the coming six months to show a moderate increase year on year. We also anticipate that, in view of the continued modest demand for office space, the vacancy rate will rise further,” says Rotberg, adding: “However, despite this, we do not expect the vacancy rate on new build property to increase. Modern office space will also be more sought-after going forwards in view of its high flexibility and occupiers’ increasing ESG requirements.”