A host of second tier cities across Germany are undergoing positive change with office rent growth outshining that experienced in the typically dominant Big 7.
According to Corpus Sireo’s Germany 21: Regional office market index, office rents in 14 German second tier cities increased on average by 1.8% to €8.24/m2 in the second half of 2015; in the same period, the German Big 7 cities reported 1.2% growth to an average of €13.25.
Over a 12-month period, the secondary cities have achieved growth of 1.9% in asking rents, outperforming the prime cities by +1.8%. In particular, volatility in the regional centres was lower than that seen in the top metropolitan areas. Throughout 2015, rents reported constant growth on average in the surveyed 14 cities, whereas they fluctuated at the prime cities.
At the end of 2015, the average asking rents at the secondary cities ranged between €6.86/m2 in Leipzig and €9.86/m2 in Wiesbaden. The differences between the cities are considerable: the scale ranges from a decline of -1.6% in asking rents in Mannheim to an increase of 7.6% in Aachen compared with 2014/2015.
Both old buildings (built before 1945) and modern buildings (built less than three years ago) continued to occupy the leading positions. At the end of 2015, new-build rents on average amounted to €11.95/m2, while – depending on the particular city – rents for old buildings ranged between €4.80 and €11.80.
Corpus Sireo’s report includes a special focus on Essen, the fourth largest second tier office market with 4 million m2 of total rental area. With the city benefitting from a good economy, five of the 50 strongest turnover companies in Germany, including three DAX groups, have their headquarters in Essen with approximately 575,000 inhabitants.
Since 2008, average rents have increased by 17% - one of the highest growths observed in the office segment. In 2015, there was a take-up of 140,000m2 of office space, considerably higher than the long-standing average of 100,000m2 annual take-up of office space. Average asking rents were approximately €8.55/m2 and the vacancy rate of 5.3% is moderate. During 2016/17, a total of 120,000m2 of new office space is expected to be completed in Essen – 90% of which has been prelet.
