With 210,000 square metres of office take-up in the first half of 2021, the Hamburg market has recorded a 12% increase on the previous year's result. However, following a strong first quarter, international real estate consultancy firm Cushman & Wakefield (C&W) registered comparatively weak second quarter, with take-up of around 84,000 square metres. The half-year figure signals a slow market recovery after the Covid-related slump, but still lags 19 % behind the H1 five-year average and 3 % behind the H1 ten-year average.
Three major lettings of over 10,000 square metres
With around 250 new leases signed, the half-year result is on par with both the result for the equivalent period last year and the H1 five-year average. In contrast to the same period last year three major letting totalling around 42,000 square metres of office space were registered in the first six months of 2021. These account for around 20 % of total take-up in the first half of the year. The largest transaction remains the leasing of around 17,600 square metres in Michaelis Quartier by the Attorney General's Office which took place in the first quarter.
Industrial companies with strongest turnover, Hamburg City most sought-after submarket
In the first half of 2021, industrial companies and public sector administration made the strongest contribution to take-up, as they did last year. Industrial companies accounted for 16 deals for a total of around 35,000 square metres of office space, while seven public administration institutions contributed 27,000 square metres of take-up.
Hamburg City continues to be the most sought-after submarket with around 61,000 square metres or about 29 % of take-up. With 28,500 square metres or 13 % of take-up, Ottensen-Bahrenfeld comes second in the submarket ranking, closely followed by City Süd and HafenCity.
Tobias Scharf, Head of Office Agency Hamburg at Cushman & Wakefield, explains: "Even after the end of the Covid pandemic, various users will have a greater reliance on remote working. But we are again seeing significantly more office users than in recent months who want to implement their newly developed workplace concepts and need new space accordingly. In addition, major leases in the pipeline lead us to expect higher take-up in the second half of the year. With an expected annual take-up of around 450,000 square metres, the year-end result would be significantly above the 2020 level of 343,000 square metres."
Supply of space on the Hamburg office market is growing
In the past twelve months, the vacancy rate rose by 0.6 percentage points to 4.2 %. The absolute supply of space in existing stock increased by 100,000 square metres to 635,000 square metres, which makes the office market more attractive again from a user perspective. The reasons for this were the weak demand for office space due to the pandemic and the related increase in sublet space. As a result, incentives will rise slightly again and owners will have to show greater flexibility in terms of lease terms and tenant fit-out.
Construction activity and pre-letting rates remain at a high level
During the first half of 2021, around 95,000 square metres of modern office space was completed in Hamburg, 97 % of which is already let or allocated to owner-occupiers. The largest completion is the Olympus Campus in City Süd, developed by the Zech Group, with around 47,000 square metres of office space fully let to Olympus and Design Offices.
A total of 517,000 square metres of office space is under construction and is expected to be completed by 2025. Of this, 60 % has already been allocated to users. In addition, there are concrete plans for further development projects of 830,000 square metres of office space, of which more than a quarter has already been let.
Prime rent remains sustainably achievable at 30.00 euros per square metre per month
The consistently high interest in modern office space in city centre locations has kept the prime rent at a sustainably achievable level of 30.00 euros per square metre per month for 18 months. The further increase in construction costs and the reconceptualising of the office working world, with a focus on high location and fit-out quality lead us to expect moderate growth in prime rent in the medium term.
Unlike the prime rent, the weighted average rent rose slightly year-on-year. It currently stands at €18.10 per square metre per month across all building classes. Compared to the same point last year, it has risen by 1.30 euros or 8 %. The main reason for this development is large-scale pre-lettings in the new developments that currently characterise the city, such as the Elbtower, the Ballinhof and the Springer Quartier.
