Letting was strong in the 3rd quarter of 2022 in the Frankfurt office letting market, reports international real estate consultancy firm Cushman & Wakefield. Lettings and owner-occupancies totalling 102,500 sq m were concluded.
This corresponds to an increase of 26 percent compared to the previous quarter and 13 percent compared to the same quarter last year. Over the first three quarters of 2022, total office take-up of 291,000 sq m was achieved in the Frankfurt market. This figure is around 15 percent above the previous year's value. It did however fall short of the 5-year average by around 13 percent.
Few large deals in the 3rd quarter
The quarterly result was mainly driven by the letting of 18,600 sq m of office space in Gallusanlage 8 to ODDO BHF AG. This was the only letting of over 10,000 sq m in the 3rd quarter. The next-largest deals were those of the University Clinic Frankfurt who leased 8,200 sq m in Allianz-Kai and the leasing of 6,900 sq m of office space by the engineering company Schüßler-Plan in the Atreeum development in Frankfurt's Ostend.
Pierre Nolte, Head of Office Leasing Frankfurt at Cushman & Wakefield, explains: “As in previous years, Frankfurt's banking district is defying all odds and remains by far the submarket with the greatest demand for space. In particular, the lease brokered by Cushman & Wakefield for ODDO BHF AG sends a clear signal that major users will continue to rely on the physical presence of employees in the office. This is also supported by the generally high level of activity on the occupier side. The market is being actively examined for alternatives to the current utilisation situation and there are a large number of large space requests - significantly above the volume of the last two years. Whether this will ultimately lead to a high take-up and a large number of relocations is not yet foreseeable. Accordingly, we expect the overall take-up for 2022 to be below last year's figure."
Falling vacancy
The vacancy rate at the end of Q3 2022 is 7.2 percent. This is a decrease of 90 basis points compared to the previous quarter. In total, around 850,800 sq m of office space was offered to let for immediate occupation at the end of September. The decline of 104,200 sq m is mainly due to sublet space that is no longer offered for occupancy within 3 months and thus no longer counts as vacant space.
High completion volume in Q3
Over the first three quarters of 2022, 88,200 sq m of office space was completed in the Frankfurt market area, of which 17 percent is still available. The third quarter alone saw 63,700 sq m of new space enter the market. This includes the completion of ONE in the Europaviertel submarket with around 44,500 sq m of office space. A further 35,000 sq m is expected by the end of the year, 48 percent of which is still available. This would however still bring the completion volume for the year as a whole to less than the 200,000 sq m mark for the first time in two years. The planned completion volume for 2023 is 215,100 sq m with a current pre-letting rate of just under 40 percent.
Slightly lower average rent level
The weighted average rent across all new lettings in the last 12 months is currently EUR 23.30/sq m per month. This corresponds to a decrease of EUR 0.50/sq m or 2.1 percent compared to the previous quarter. Compared a year previously, the weighted average rent has fallen by EUR 0.70/sq m. At the end of the third quarter, the prime rent was EUR 47.50/sq m per month and thus showed no change compared to the previous quarter, while having risen by EUR 1.00/sq m over the last 12 months. Cushman & Wakefield expects the rent level to remain stable for the rest of the year due to the demand for modern, energy-efficient office space and the continuing elevated level of construction costs.
