To the end of September 2023, international real estate consultancy firm Cushman & Wakefield (C&W) recorded take-up of around 327,000 sq m in Hamburg’s office letting market. With the exception of 2020, which was marked by Covid-19, this is the lowest nine-month result since 2013. It is 31 percent below the strong prior-year period, 16 percent behind the 5-year average and 15 percent behind the 10-year average of the first three quarters.
Major deals remain scarce in Hamburg's office letting market
In the first nine months, 385 deals were recorded. This is 18 percent fewer than in the strong prior-year period, which was marked by pandemic-related catch-up effects (469) and 5 percent less than the 5-year average of the first three quarters (407). At 61 percent (234), the highest number of deals were registered in the smallest space category, below 500 sq m. Thus, the office leasing activity in the course of the year so far has been dominated by small companies.
On the other hand, large-scale deals of 5,000 sq m or more remain few and far between. Q1–Q3, nine deals in this size class totalled around 80,000 sq m. In the same period of 2022, there were 17 such deals totalling around 180,000 sq m. The largest letting was of 17,200 sq m to RTL at Koreastrasse 7 in HafenCity.
For Q4 2023, C&W expects market momentum to remain at a moderate level. As a result, total take-up of around 450,000 sq m is expected for 2023 as a whole. This would be around 12 percent below the 10-year average.
Focus on prime locations
Almost half of the letting activity was in the prime locations of the city centre, HafenCity and Hafenrand, of which just under 70 percent was in A-quality buildings. Location and fit-out quality therefore remain occupiers focus of attention.
Tobias Scharf, Head of Office Agency and Branch Manager of C&W in Hamburg, comments: “The demand for modern office space in the central City Centre, HafenCity and Hafenrand submarkets remains high. The letting process has become more complex in recent years due to economic uncertainties, changing working environments and increasing ESG requirements. At the same time, less central locations, such as City Nord, are losing their attractiveness. Solutions will have to be found for stock here. In particular, non-central existing buildings with a modernisation backlog will have difficulties in re-letting and may require repositioning or repurposing in order to become marketable again.”
Prime rents stable at record levels, average rents down slightly
For the fourth successive quarter, prime rents are at their highest level ever recorded at EUR 33.00/sq m per month. Compared to the previous year, this corresponds to an increase of EUR 0.50 or just under 2 percent. The persistently high demand for high-quality space in central locations is expected to cause prime rents to rise slightly again in the 4th quarter.
The weighted average rent across all transactions in the past twelve months has declined slightly compared to the previous quarter (EUR 21.45/sq m per month) to EUR 20.70/sq m per month. This is EUR 0.05 lower than at the end of September 2022.
Telecommunications, media and technology sector with the highest take-up
The sector ranking over Q1–Q3 is led by companies from the telecommunications, media and technology sector (50 deals; 67,200 sq m of office space). This result was significantly boosted by the RTL lease. Close behind, in second place, is the industrial, transport and traffic sector (50 deals; 60,900 sq m). Most of the leases (58) were signed by consulting firms, which leased around 37,000 sq m.
Stable availability of space
Compared to a year previously, the vacancy rate rose by 0.3 percentage points and stood at 4.6 percent at the end of September, as in the 1st and 2nd quarters. The last time the vacancy rate was higher was in early 2018. Absolute vacancy grew by 62,700 sq m to around 706,000 sq m. Additional vacancy in existing space and space released for subletting could cause the vacancy rate in Hamburg to continue to rise moderately for the remainder of 2023.
Deferred development projects and very little speculative construction
From January to the end of September 2023, around 167,800 sq m of new and refurbished office space was completed in Hamburg. One of the largest projects is the “Kap 5” in City Nord with around 23,000 sq m of office space, which was built for Signal Iduna and was completed in the 2nd quarter.
A total of 560,900 sq m of office space is currently under construction for expected completion by 2026. This is roughly in line with the high level of the past five years. Of this space, 63 percent is already allocated to users. In addition, there are concrete plans for development projects totalling around 481,700 sq m. This is 26 percent or around 165,000 sq m less than at the end of 2022. Increased construction and financing costs are increasingly leading to developers postponing speculative new construction. In the future, this will reduce the supply of high-quality new-build space.
