Office take-up via lettings and owner-occupancy in Frankfurt’s real estate market totalled around 363,200 sq m in 2023. This year-end result was 3 percent below the previous year's figure (2022: 374,000 sq m).
Markus Kullmann, Head of Office Agency Frankfurt at C&W, explains: “The continued persistent demand for high-quality space in central locations, which accounted for around 50 percent of office take-up in 2023, is confronted with a reduced supply of new buildings. Coupled with the deferral of planned office properties due to developers’ high pre-letting and equity ratio requirements as well as the insolvencies of some property developers, this holds considerable potential for rent increases for new-build space. In addition, increased activity in lease negotiations for existing stock is expected.”
Take-up: Only two leases of more than 10,000 sq m in the course of the year
- For 2023 as a whole, take-up amounted to 363,200 sq m. This is 21 percent below the 5-year average.
- With office take-up of around 92,500 sq m, Q4 was the strongest quarter of 2023.
- The largest letting of the year took place in Q4, with around 12,400 sq m let to Deutsche WertpapierService Bank in the “Phoenix” development project at Kölner Straße 5 in Eschborn.
- The size segment from 2,000 sq m to less than 10,000 sq m contributed around 37 percent of office take-up in 2023, which is 9 percentage points above the 5-year average of 28 percent. This reflects an adjustment of demand parameters towards smaller size segments.
- Two lettings in the 10,000 sq m or more category contributed only around 7 percent to annual take-up, which is well below the 5-year average of around 26 percent. In addition to the Q4 Deutsche WertpapierService Bank deal, a company from the industrial sector leased around 12,400 sq m in “The Move” at Frankfurt Airport in Q3.
- In 2023, the proportion of take-up in A-quality office buildings was around 42 percent. For large-scale users with an area of 5,000 sq m or more, this figure is as high as 73 percent.
Note: A lease by the City of Frankfurt for two schools of over 46,000 sq m in the Lateral Towers property is not counted as office space take-up due to extensive conversion work.
Rental prices: Prime rent quoted at EUR 48.00/sq m per month at the end of 2023
- In Q4, prime rent in Frankfurt remained stable at EUR 48.00/sq m. Compared to the end of 2022, it has risen by EUR 0.50/sq m or 1.1 percent.
- The weighted average rent across all new lettings in the past twelve months is EUR 23.70/sq m per month. Compared to both the previous quarter and the equivalent quarter of the previous year, this corresponds to a decline of EUR 1.10/sq m or 4.4 percent.
- As can be seen from the analysis of leasing behaviour regarding size segment and the quality of office space, the trend towards reducing space in favour of renting high-quality space in good locations continues. For this reason, C&W also expects prime rents to rise in the course of 2024.
Vacancy rate: 9.3 percent at the end of the year
- At the end of December, around 1.09 million sq m of office space was available for immediate occupancy. This corresponds to a vacancy rate of 9.3 percent and is 1.2 percentage points higher than at the end of 2022. Compared to the previous quarter, the vacancy rate remained stable.
- At around 121,600 sq m, the supply of subletting space increased by around 50,000 sq m compared to the previous year and currently accounts for around eleven percent of vacancy.
Completions: High level forecast for 2024 likely to followed by decline
- In the Frankfurt market area, around 51,200 sq m of office space was completed in Q4 2023, compared to 142,000 sq m for the full year. 53 percent of this was still available for rental on completion.
- At the end of December 2023, 417,400 sq m of office space was under construction. Compared to December 2022, this corresponds to a decline of 11 percent. Some 33 percent of the space under construction is still vacant.
- In 2024, a high volume of completions is expected again due to projects already under construction. Compared to the past four years (2020–2023), around 30 percent less space will be completed between 2024 and 2027. This corresponds to a reduction of an average of 50,000 sq m per year. This is due to the fact that projects are no longer being started speculatively.
- The significant reduction in construction activity, in combination with continued high demand from occupiers for new-build space, will have impact on take-up via an increase in renewals for tenants’ existing premises.
