In the first six months of 2022, international real estate consultancy firm Cushman & Wakefield (C&W) registered take-up of 407,000 sq m in the Munich office market. Compared to the weak first half last year, take-up rose by 72 percent. The current result is thus 8 percent above the H1 five-year average (377,700 sq m) and 14 percent higher than that of the past ten years (355,500 sq m).
Three deals over 15,000 sq m in the 2nd quarter
The largest lettings in the second quarter were to Hoffmann SE in the Freiham Nord MK 2 project in Freiham with around 22,100 sq m, TÜV Süd Aktiengesellschaft as owner-occupier in Laim with around 20,000 sq m and ProSiebenSat.1 Media SE as owner-occupier in Unterföhring with around 17,300 sq m. These three deals accounted for a total of 29 percent of the total take-up in the past three months.
In total, four lettings of over 10,000 sq m were recorded in the first half of the year, totalling 79,100 sq m. This is far above the last year’s equivalent result, when 14,100 sq m were contributed in this size category.
Industrial sector take-up significantly above that of last year
Companies from the industrial, transport and traffic sectors were significantly more active in the first six months than in H1/ 2021, leasing 118,200 sq m by the end of June 2022 (H1/ 2021: 45,000 sq m), which corresponds to 29 percent of total take-up. 67,000 sq m of this took place in second quarter. The IT sector followed with a 26 percent share of take-up or 105,400 sq m.
Hubert Keyl, Head of Office Agency Munich at C&W, comments: "The macro-political framework data are more uncertain than they have been for many years. This makes the robust performance of the financial year to date all the more surprising. However, a possible recession could also put the Munich office property market in difficult waters - even if it has always come through crises relatively well in the past due to its broad sector mix."
Vacancy rate rises to 5.2 percent
Compared to a year ago, absolute vacancy has risen from 806,400 sq m to 1,103,100 sq m (+ 37 percent) raising the vacancy rate to 5.2 percent (Q2/2021: 3.8 percent). In the surrounding area submarkets the increase was stronger still: from 6.5 percent at the midpoint of 2021 to 10.5 percent now. Despite the high take-up in the surrounding area submarkets (125,100 sq m), there has hardly been any reduction in vacancy, as 46 percent of this take-up was in development projects.
Construction activity remains at a high level
In the Munich office market, around 87,500 sq m of modern office space was completed in the first half of 2022. Around 13 percent of this is still available. 1.7 million sq m of office space is under construction with completion from Q3 2022 to 2026. The pre-letting rate here is currently 42 percent. 51 percent of these development projects are in central Munich.
Monthly prime rent rises to new record high of EUR 42.50/sq m
The achievable prime office rent has risen steadily since Q2 2021. At EUR 42.50/sq m, it is currently at the highest level ever recorded and EUR 2.50 above the level of a year previously. In the first six months of this year, C&W registered eight deals at this level, all in the Altstadt and the Innenstadt West submarkets. The area-weighted average rent for new lettings over the past twelve months also reached a new peak of EUR 23.70/sq m per month, an increase of EUR 2.50 over 12 months and 55 cents above the previous quarter. C&W expects further records for prime rents to be set by the end of the year.
