In the first half of 2022, take-up of 188,700 sq m was achieved in the Frankfurt office letting market, reports international real estate consultancy firm Cushman & Wakefield. Compared a year previously, this corresponds to an increase of around 12 percent. Nevertheless, the result is 8 percent below the H1 5-year average.
Below-average quarterly result
A lack of major deals and subdued letting activity led to a below-average quarterly result. The only letting of over 10,000 sq m was to Citibank in the Taurus development project in the city centre. Take-up in Q2 was 81,600 sq m, 7 percent down on the equivalent quarter last year and almost 24 percent down on Q1 (107,100 sq m).
The sector with the highest take-up in the first half of the year was banking and finance, which accounted for almost 25 percent of take-up, followed by public administration, which came second thanks to GIZ's owner-occupier deal in Q1. Law firms also remained active and were the third-strongest sector with take-up of just under 19,000 sq m. An important deal was the leasing of around 8,500 sq m of office space in the Central Parx development project by the law firm Noerr.
Pierre Nolte, Head of Office Leasing Frankfurt at Cushman & Wakefield, explains: "Frankfurt lacks current growth sectors such as tech and particularly online retail, which is having a lasting effect on take-up. This makes us dependent on companies already located here, which are currently mainly downsizing. For this reason, we do not see a return to the record pre-pandemic years in the foreseeable future. Nonetheless, we can't complain that there’s a lack of occupier activity."
Stable vacancy level
The vacancy rate stands at 8.1 percent. It is thus unchanged from a year ago but has increased by 10 basis points compared to Q1. In total, around 955,000 sq m of office space was available for immediate occupancy at the end of June. Cushman & Wakefield expects a slight increase in vacancy by the end of the year due to developments which were started on a speculative basis.
Delays in development projects
Only 24,600 sq m of office space was completed in H1 2022. A further 80,200 sq m is expected in H2, of which 59 percent is still available.
Building material supply chain problems are currently causing delays in numerous development projects including the FAZ Tower and The Spin in the Europaviertel. The expected completion volume for the next two years is correspondingly high at 238,000 sq m (2023) and 216,300 sq m (2024).
Pierre Nolte: "The changed financing environment, the uncertainty about rising construction costs and investors’ restraint in purchasing are having an impact on construction activity in Frankfurt. Thus, no speculatively developed property will come onto the market outside the prime locations."
Increase in average and prime rents
The weighted average rent across all new lettings in the last 12 months is currently EUR 23.80/sq m per month. This corresponds to an increase of EUR 0.80/sq m or 3.5 percent compared to the previous quarter. Compared a year ago, the average rent has risen by EUR 0.60/sq m. The prime rent at the end of the second quarter was EUR 47.50/sq m per month. Compared to Q1, this represents an increase of EUR 1.00/sq m or 2.2 percent. In the past 12 months, the prime rent has risen by EUR 1.50/sq m. Cushman & Wakefield expects the demand for premium space in very good locations and the rise in commodity prices to lead to further increases in rent levels in the second half of the year.
