City Survey
Q3 2024
Letting Market
Office leasing market with slight upturn from a low level
In Germany’s seven largest office letting markets, around 1.9 million square metres of office space were taken up in the first three quarters of 2024. This exceeded the previous year’s result by around 6 percent. Stuttgart and Munich (around 37 percent each) showed the most significant increase compared to the previous year. Declines were observed in Hamburg (-13 percent) and Düsseldorf (-12 percent).
In the third quarter of 2024, the slight market upturn that we had already registered in the previous quarters has continued. Compared with the previous quarters, take-up rose again slightly to 670,000 square metres. In the size segment over 10,000 square metres, five deals with a total area of around 115,000 square metres were counted. It is interesting to note that all five deals were concluded by tenants from the public administration sector.
take-up in the top 7 (+6% yoy)
This underlines the importance of this group of tenants for the office market in an economically difficult environment and continues to show how far the public sector has to catch up in terms of modern office space.
Office Space Take-up in the TOP 7 (in million sqm)
Forecast from 2024
Average Rents in the TOP 7 in €/sqm
Vacancy rate with further increase in the third quarter
In the third quarter, the vacancy rate continued the upward trend of recent quarters. With an increase of 30 basis points or 335,000 square metres compared to the previous quarter, the vacancy rate reached a level of 7 per cent for the first time since 2013. With a completion volume of around 1.5 million square metres per year, new construction activity will remain at a high level in the years 2024 to 2026. According to the current status, a noticeable slump to 600,000 square metres is then expected in 2027.
The currently still high level of construction activity and the weakening demand for space are currently driving up vacancies.
vacancy rate in the Top 7
We expect this trend to continue in the coming year, albeit at a slower pace.
From 2027 onwards, the slump in construction activity will take effect, which will then lead to a noticeable shortage of modern office space in the following years. In the market as a whole, we expect vacancy rates to plateau in the following years.
Completions of Office Properties in the TOP 7 (in total in 1.000 sqm)
Forecast from 2024
Vacancy Rate in the TOP 7 in %
Prime rents continue to trend upwards in the majority of the top 7
In a year-on-year comparison, prime rents increased again in five of the top 7 locations. Munich (15.2 percent) continues to lead the field, followed by Düsseldorf (10.3 percent), Frankfurt (4.3 percent) and Berlin (2.9 percent). In Stuttgart and Hamburg, prime rents have stabilized at a high level in recent quarters, while in Cologne a decline of around 7 percent was recorded. The high-priced contracts of previous years could not be repeated here.
Average rents also rose in the third quarter of 2024 compared to the previous year in all locations except Düsseldorf (-2.4 percent). The strongest increases were observed in Stuttgart (14.4 percent) and Munich (7.2 percent).
Outlook: Market recovery weaker than expected at mid-year, stronger growth impulses not until mid-2025 at the earliest
Even though the slight market recovery of the previous quarters continued in the third quarter, the momentum fell short of our expectations. The outlook for economic development has deteriorated significantly in recent months. This is shown by the declines in the ifo Business Climate Index and the negative revisions to the growth forecast of leading research institutes. Economic tailwind for the office rental markets is therefore not expected until 2025 at the earliest.
For 2024 as a whole, we expect take-up of up to 2.4 million square metres, a result on a par with the previous year.
Office leasing market data
| Berlin | Dusseldorf | Frankfurt | Hamburg | Cologne | Munich | Stuttgart | |
|---|---|---|---|---|---|---|---|
| Take-up Q1-Q3 2024 in sqm | 435,940 | 153,000 | 267,800 | 290,000 | 155,500 | 444,500 | 146,000 |
| Take-up Q1-Q3 2023 in sqm | 434,000 | 174,200 | 274,500 | 334,200 | 135,000 | 324,500 | 106,700 |
| Change in % | 0.4% | -12.2% | -2.4% | -13.2% | 15.2% | 37.0% | 36.8% |
| Prime Rent Q3 2024 in €/sqm | 45.50 | 43.00 | 48.00 | 35.00 | 31.50 | 53.00 | 35.00 |
| Prime Rent Q3 2023 in €/sqm | 44.20 | 39.00 | 46,00 | 34.50 | 34.00 | 46.00 | 35.00 |
| Change in % | 2.9% | 10.3% | 4.3% | 1.4% | -7.4% | 15.2% | 0.0% |
| Average Rent Q3 2024 in €/sqm | 29.10 | 20.70 | 24.50 | 20.60 | 19.00 | 25.20 | 20.70 |
| Average Rent Q3 2023 in €/sqm | 28.90 | 21.20 | 23.70 | 20.50 | 18.50 | 23.50 | 18.10 |
| Change in % | 0.7% | -2.4% | 3.4% | 0.5% | 2.7% | 7.2% | 14.4% |
| Vacant Space Q3 2024 in sqm | 1,680,390 | 697,600 | 1,167,630 | 624,000 | 307,300 | 1,882,900 | 461,500 |
| Vacant Space Q3 2023 in sqm | 1,048,000 | 662,500 | 1,097,350 | 520,000 | 249,600 | 1,458,800 | 433,400 |
| Vacancy Rate Q3 2024 in % | 7.2% | 8.7% | 10.1% | 4.3% | 3.8% | 8.1% | 5.4% |
Data as of Q3 2024
Industrial and logistics real estate market slightly below previous year’s level
At the end of the third quarter, the German industrial and logistics real estate market generated take-up of around 4.1 million square metres. This corresponds to an increase of 2 percent compared to the previous year. The German TOP 8 industrial and logistics real estate markets accounted for a share of 37 percent with 1.5 million square meters. This result corresponds to a decline of 2 percent compared to the previous year. The five-year average was missed by about a third.
take-up I&L (+2% yoy)
For the first time in a year, take-up in the TOP 8 regions has risen again compared to the previous quarter. However, we observe strong regional differences.
Anecdotally, for example, the summer months in Berlin and Düsseldorf were the strongest this year, while Hamburg and Cologne recorded the weakest quarter of the year in the summer. Overall, it can be said that demand continues to weaken. A distinction must be made between the small-scale and large-volume area segments. In addition to the analysis of the deals, we also note that a large number of the current applications were registered in the small-scale segment, while we see little movement for properties in the area of over 10,000 square metres in many regions.
Take-up characterised by small-scale lettings
Compared to the previous year, four of the top 8 industrial and logistics real estate markets recorded an increase in take-up. The highest take-up was generated by Frankfurt with 309,400 square meters. Cologne recorded the largest increase in take-up compared to the previous year, with an increase of 61 percent. The lowest take-up and at the same time the largest decline in a 12-month comparison was recorded in Stuttgart with 95,200 square metres (-46 per cent).
The focus of the users was primarily on the small-scale space segment up to 3,000 square metres. Around two-thirds of all deals were concluded in this area and were responsible for just under a quarter of the total take-up in the TOP 8 regions. The largest deal in the first nine months was the owner-occupier settlement of GROUP7 in the northern outskirts of the Munich logistics region. In the first quarter, the company broke ground for a 60,000-square-metre logistics hall there, which had a significant impact on take-up in Munich. The second-largest deal was also the largest deal of the third quarter. This is the production company Beiersdorf AG, which is building a hall of around 40,000 square meters in Leipzig for its own use. The largest lease in the third quarter took place in the Munich logistics region in the northern region, where Isar Aerospace leased a logistics hall of around 28,300 square meters.
The strongest user group at the end of the third quarter was retail companies, with a share of 29 percent of total take-up, followed by logistics service providers with 28 percent and the manufacturing industry with 25 percent.
The current market situation and subdued consumer behaviour are leading to a certain reluctance on the part of users. The construction freeze of Intel, the bad news of VW and the insolvency of Esprit are omnipresent in the press. At the same time, we are observing a growing interest in space that is to be used to consolidate several locations.
This leads to a dynamic development in the rental market, in which new space is rented while the old existing space comes onto the market at the same time. It remains to be seen when the current rise in real wages will have an impact on consumer behaviour. At least we are noticing a slight revival in space applications in e-commerce.
Prime rents remain stable
With the exception of the Munich logistics region, prime rents in the TOP 8 regions remained stable compared to the previous quarter. Compared to the previous year, however, the prime rents of the TOP 8 regions recorded an average growth of 5 percent. The average rent has even risen slightly more sharply in a 12-month comparison at 7 percent. At 9.50 euros/square metre, Munich continues to have the highest prime rent and, at 12 per cent, also the highest rent growth compared to the previous year. Leipzig brings up the rear in terms of prime rents at 5.80 euros/square metre. In contrast, Stuttgart has the lowest rent growth at 2 percent.
Overall, we see more supply entering the market due to weakened demand and an increase in insolvencies, which will slow down rental growth in the coming quarters. Nevertheless, we expect rents to rise in the medium term if a rebound in demand meets a significantly decreasing new construction pipeline.
prime rental growth in the top 8 compared to the previous year
Industrial and logistics leasing market data
| Top 8 | Berlin / Brandenburg | Dusseldorf | Frankfurt / Rhine-Main | Hamburg | Cologne | Leipzig | Munich | Stuttgart | |
|---|---|---|---|---|---|---|---|---|---|
| Take-up Q1-Q3 2024 in qm | 1,514,000 | 218,000 | 170,100 | 309,400 | 182,300 | 195,400 | 179,300 | 164,400 | 95,200 |
| Change year- on-year in % | -2% | -8% | 23% | 11% | -31% | 61% | -17% | 42% | -46% |
| Leasing take- up Q1-Q3 2024 in qm | 201,800 | 155,100 | 254,400 | 164,400 | 174,900 | 68,300 | 104,400 | 95,200 | |
| Change year- on-year in % | -15% | 38% | -8% | -21% | 56% | -65% | -10% | -28% | |
| Forecast for take-up end of year 2024 | |||||||||
| Number of deals | 405 | 69 | 53 | 71 | 64 | 44 | 27 | 40 | 37 |
| Average size per deal | 3.738 | 3.159 | 3.209 | 4.358 | 2.848 | 4.441 | 6.641 | 4.110 | 2.573 |
| Most important sector | Retailers | Retailers | Logistics service providers | Retailers | Logistics service providers | Retailers | Logistics service providers | Logistics service providers | Production & Manufacturing |
| Prime rent in EUR/qm | 7.90 | 7.90 | 8.00 | 8.25 | 7.70 | 5.80 | 9.50 | 8.30 | |
| Forecast end of year 2024 | |||||||||
| Average rent in EUR/qm | 7.00 | 6.70 | 6.40 | 6.70 | 6.00 | 5.30 | 8.50 | 7.00 | |
| Forecast end of year 2024 |
Data as of Q3 2024