International real estate consultancy firm Cushman & Wakefield (C&W) recorded take-up of around 470,000 sq m in Munich’s office letting market in 2023. This represents a decrease of 39 percent compared to 2022. With a result of around 144,000 sq m, the 4th quarter was the strongest of 2023.
Hubert Keyl, Head of Office Agency Munich and Head of the Munich branch of C&W, commented: “We are observing that prospective tenants are predominantly moving into high-quality office properties, but this is creating severe price pressure due to a lack of supply. Rents tending towards EUR 50 per square metre are now being achieved more and more regularly. As a result, tenants are reducing up to 30 percent of their space requirements. If the quality and location of the property meet the high demands of the tenants, the surrounding area will also increasingly come into focus.”
Take-up: Q4 saw the strongest take-up of 2023
- In 2023 as a whole, take-up totalled 469,500 sq m, a decrease of 39 percent compared to the previous year. The figure is also 37 percent below the 10-year average. An annual result of less than 500,000 sq m was last recorded in 1997.
- At 143,700 sq m, take-up in Q4 was not only the highest of 2023, but also showed a significant recovery (+64 percent) compared to the weak Q3. In addition to an increase in the number of deals (26 more than in the previous quarter), the largest lettings of the year also took place in Q4.
- In Q4 2023, there were seven deals of 3,000 sq m or more, but again no lettings over 10,000 sq m, with none in the entire year compared to six in 2022.
- The focus in 2023 was on space under 1,000 sq m, where were 491 lettings, together accounting for 43 percent (200,200 sq m) of total take-up. In 2022, it was 29 percent (224,300 sq m).
- As in the previous quarter, industrial companies as well as companies from the technology, media and telecommunications sectors were the main drivers of leasing activity in the fourth quarter, together accounting for 34 percent of take-up.
- Strikingly, 49 percent (70,300 sq m) of the space let in Q4 was in A-quality properties, which once again underlines tenants’ flight-to-quality (Q3 2023: 43 percent). Of this, 40,900 sq m (58 percent) was in old town and central locations.
- Around 34 percent of take-up in Q4 was generated in the surrounding area, compared to 28 percent for the year as a whole. This figure is above the 5-year average of 21 percent.
- The leasings by the Technical University of Munich (around 9,700 sq m) in LOC46 (municipality of Planegg) and Agile Robots AG (around 9,300 sq m) in ISARWORK were the largest deals of both Q4 and the full year.
- For 2024, C&W expects a further slight increase in take-up.
Rental prices: Prime office rent reaches new high of EUR 47.00/sq m
- In Q4, prime rents in Munich reached a new all-time high of EUR 47.00/sq m. This is due in particular to tenants’ significantly intensified focus on quality, which goes hand-in-hand with correspondingly higher rental prices. The limited supply in the high-end segment also continues to drive up prices.
- Compared to Q4 2022, the figure corresponds to an increase of EUR 3.50/sq m (+8 percent).
- The prime rent is achieved in the Old Town, City Centre North and City Centre West submarkets.
- At the end of December 2023, the area-weighted average rent for new lettings over the previous twelve months was EUR 23.95/sq m per month, the same as at the end of December 2022.
Vacancy: Around 5.7 percent of all office space in Munich is available for immediate occupancy
- At the end of Q4, vacancy in office space in Munich totalled just over 1.2 million sq m. This corresponds to a vacancy rate of 5.7 percent and is 50 basis points higher than at the end of 2022.
- This remained static at the level of the previous quarter.
- Around 121,500 sq m of the vacant space in Q4 2023 is subletting space. This figure has not changed from the previous quarter, but is about 9 percent higher than for Q4 2022.
Completions: High level of completions for the year as a whole
- In Q4, 48,000 sq m of office space was completed (new construction or core refurbishment), and in 2023 as a whole the total was 407,100 sq m, almost double the level of the previous year. At the time of completion, 51 percent of this space was already let or allocated to owner-occupiers.
- Around 802,500 sq m of office space is currently under construction – 58 percent of this is still vacant.
- The current project pipeline envisages the realisation of a further 1.0 million sq m of office space. It remains to be seen whether all planned projects will actually be implemented in view of the current state of the market.
