In the first three quarters of 2022, international real estate consultancy firm Cushman & Wakefield registered take-up of 610,800 sq m in the Munich office market. The result is thus back at the pre-Covid-19 level and around 8 per cent above the 5-year average. Compared to last year’s equivalent result, the increase in take-up is around 35 per cent.
Strong 3rd quarter ensures positive 9-month result
Take-up in the 3rd quarter amounted to 203,900 sq m, meaning there have been three consecutive quarters with take-up above the 200,000 sq m mark, a feat which last occurred in 2018. A particularly large boost in take-up in the third quarter was provided by the conclusion of a lease by the software company Personio GmbH for around 39,900 sq m in the Elementum office project. In terms of space, this major letting also represents the third-largest letting ever concluded in Munich’s office letting market. In addition, a Munich law firm has leased a good 15,000 sq m in a SIGNA project near the main railway station.
Hubert Keyl, Head of Office Agency München at C&W, comments: “The economic uncertainties have become noticeable among companies in recent months; particularly with regard to the question of the size of space to be leased. We are observing that leasing decisions are being made more slowly, but ultimately very purposefully. Due to the high rents within the Munich city boundary, we are noticing a visible shift in demand towards space in the surrounding area where good 28 per cent of take-up in the market was recorded."
Rents for office space continue to rise
The achievable prime office rent continued to rise in Q3 2022 and currently stands at EUR 43.00/sq m per month. Compared to the previous year, this is an increase of around 5 per cent. The achievable prime rent is mainly achieved in the Altstadt submarket and the Innenstadt West submarket.
The area-weighted average rent for new lettings in the past twelve months also reached a new peak. It now stands at EUR 24.30/sq m per month, an increase of EUR 2.10 on the same point last year and 60 cents above the previous quarter. C&W expects peak and average rents to continue rising until the end of the year.
Vacancy rate stabilises
Absolute vacancy at the end of the third quarter was around 1.09 million sq m, an increase of around 18 per cent compared to the same point last year. The vacancy rate in the Munich market is therefore currently 5.1 per cent. In Q2 2022, vacancy still totalled 1.10 million sq m and 5.2 per cent. Prior to this, the office vacancy rate had increased continuously from quarter to quarter since the beginning of the pandemic.
Construction activity remains high, new buildings are popular with tenants
A total of around 203,200 sq m of office space was completed in the Munich office market in the first three quarters of 2022. Compared to last year, the completion volume has increased by around 21 per cent. Of this, just under 29 per cent is currently still available.
Another 80,500 sq m of office space will be completed by the end of the year - if construction progresses as planned. A total of 1.1 million sq m of office space is under construction for completion by 2026. The pre-letting rate of these projects is currently at an above-average 56 percent. New properties with highly modern and flexible space and ESG-compliant orientation are very popular.
