Two major lettings stabilise the office market
Around 172,000 square metres of office space were let in the first half of the year - 21% less than the five-year average. At just under 88,000 square metres, office take-up in the second quarter was slightly above the first quarter's figure of around 84,000 square metres. The largest deals were those concluded by Nestlé Germany for around 20,000 square metres in the Kreisler project in the Bahnhofsviertel (railway station district) and by Siemens for around 15,000 square metres in the Gateway Gardens district development at Frankfurt Airport. These two deals together contributed 20 % of the total take-up. On the other hand, the 219 deals under 1,000 square metres contributed a total of 43 % of Frankfurt's take-up in the first half of the year.
Pierre Nolte, Head of Office Letting Frankfurt at Cushman & Wakefield, explains: "The effects of the global COVID-19 pandemic are still being felt in the market. Even though take-up in this half-year has been significantly better than in the first half of 2020, there is still a lack of larger deals of between 3,000 and 5,000 square metres. The trend among tenants is clearly towards smaller spaces in good locations. This is also evident in the development of average rents. Basically, we are seeing increased space search activity, which we expect to be fulfilled and concluded this year and will have a positive effect on overall take-up. Therefore, we expect an annual take-up of under 400,000 square metres for the full year."
Vacancy rises due to completions and vacated space
Office vacancy has risen by around 100,000 square metres in the last 12 months to just under 950,000 square metres currently. The vacancy rate is 8.1%. The reasons for the vacancy include both remaining vacant space in recently completed new buildings as well as vacant space in older existing stock that have not yet found a new tenant. This is particularly noticeable in the City, Europaviertel/Messe and West Frankfurt submarkets, which have seen the highest relative increase in vacancies over the last 12 months.
Completions above average
In the first half of the year, some 87,000 square metres was completed in development projects. For the second half of the year, completions of around 115,000 square metres are expected, of which only 23% is still available. The total completion volume for 2021 will thus significantly exceed the average of the last ten years. New construction space totalling just under 215,000 square metres is expected to become ready for occupation in 2022. The pre-letting rate in this space is currently 40 %.
Prime rent stable, average rent rising
Since the end of March 2021, the prime rent has remained unchanged at 46.00 euros per square metre and month, having risen by 2.2.% in twelve months. The weighted average rent for all new leases concluded in the last twelve months was 23.20 euros per square metre per month at the end of June. Compared to the first quarter of 2021, it has risen by 0.60 euros. In the second quarter, more lettings took place in the Banking District and Westend submarkets, contributing significantly to the increase. Likewise, the share of letting in development projects increased compared to the previous year (26% vs. 22%). Tenant demand for premium space in good locations is unrelenting, which could further increase the pressure on prime rents by the end of the year.
