Relocation is the dominant factor in German office property market

According to information from international property consultancy DTZ, the number of empty properties in the four major office property centres in Germany has risen again in the first six months of 2003.

From January to the end of July of this year, 668,000 square metres of office space were rented in Berlin, Frankfurt, Hamburg and Munich. Munich heads the list at 225,000 square metres, followed closely by Frankfurt at 200,000. In Hamburg, rental contracts were signed for 138,000 square metres, and for 105,000 square metres in Berlin. The total amount is some six per cent below the figure for the previous year (1st six months of 2002: 713,000 square metres). Compared to the boom year of 2000 (1.136 million square metres), however, 40 per cent less office space has to date been rented out in these four cities.

´At present, relocation to new sites determines what is happening in the office market´, comments Tanja Severin, director of DTZ Zadelhoff Tie Leung, Frankfurt. ´Staff reduction and re-structuring in a cost-saving environment are major features of company activity and are reducing the requirement for office space. At the same time, company bankruptcies are a strain on the market. The founding of new companies and expansions of existing ones have become the exception.´ The proportion of large office
rentals was correspondingly small. Only in Frankfurt do rental contracts for over 5,000 square metres account for 70 per cent of the volume of rented property. In Munich, the proportion of large area office contracts is less than 40 per cent, in Berlin it is around 20 per cent, and in Hamburg about 10. Rental agreements for inner city property were
particularly relevant in Hamburg. Around 40 per cent of all rental contracts signed by companies were for office space in Hamburg´s city centre.

With around 1.5 million square metres of new office property coming onto the market in recent months, the amount of empty office space has markedly increased. According to DTZ, the proportion of empty space rose from 3.3 per cent in mid-2001 to 8.3 per cent in mid-2003. The highest proportion of empty office space is currently in Frankfurt, at 10.5 per cent. A year ago, only 4.7 per cent of office space was available at short notice in Frankfurt. In Munich, the proportion of empty properties has risen over the last twelve months from 2.7 to 7.9 per cent. In Hamburg, the increase was from 4 to 6.7 per cent. In Berlin, however, changes are marginal, with an increase of 0.6 per cent to a proportion of 8.6 per cent. A further 2.15 million square metres are currently under construction. Of these, around 40 per cent are rented in advance, meaning that a further 1.3 square metres will increase the amount of property available in these four cities. Munich will see the highest number of properties not already rented out coming onto the market (around 500,000 square metres). In Frankfurt, property on offer will be increased by around 360,000 square metres, in Hamburg by 285,000 square metres and in Berlin by around 185,000.

With the exception of Munich, with its top inner city rents of 16 to 34 euros, the upper level of rents has been reduced. First-class office space in the city centre of Frankfurt is the most expensive, from 34 to 39 euros per square metre per month (mid-2002: 40 to 45.50 euros). In Berlin, the best office space in the best positions costs 15 to 22 euros (previous year: 18 to 30 euros). Top quality office space in the city centre of
Hamburg is for rent at 14 to 18 euros (mid-2002: 18 to 22 euros). ´The signs are that landlords are more prepared to negotiate´, Severin stresses. ´This means that companies are offered attractive opportunities for a move to another office site.´DTZ is counting on a moderate total turnover in the office property market in the current year. ´Economic growth is the pre-condition for any change to the current trend´, says
Severin. She stresses that an upturn in the economy will for its part only show effects in the property ma

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