City Survey
Q2 2024
Leasing Market
Slight upturn in the office letting market in Germany
In the first half of 2024, around 1.23 million square metres of office space were taken up in Germany’s seven largest office letting markets. This exceeded the previous year’s result by around 7 percent. Stuttgart (52 percent), Munich and Düsseldorf (25 percent each) showed the most significant increase compared to the previous year. Declines were observed in Hamburg (-15 percent) and Cologne (-29 percent).
take-up (+7% yoy)
After a subdued start to the year in the first quarter of 2024, there was a slight upturn in the office leasing market in the second quarter. With take-up of around 627,000 square metres, the first quarter of the year was exceeded by more than 20 per cent.
The most important demand driver in the first half of the year was the large-scale segment over 5,000 square metres, with take-up of around 330,000 square metres. This corresponds to an increase of more than 30 percent compared to the same period last year. The activity is not concentrated on individual locations: In five of the top 7 locations, major deals in the range of over 10,000 square meters were registered in the first half of the year.
Office Space Take-up in the TOP 7 (in million sqm)
Forecast from 2024
Average Rents in the TOP 7 in €/sqm
Vacancy increase continues in the second quarter
The vacancy rate rose again in the second quarter and currently stands at 6.7 percent in the top 7 (+30 basis points compared to the previous quarter). Compared to the previous year, this represents an increase of more than 1.4 million square meters. On the supply side, we expect around 1.7 million square metres of new office space to come onto the market in the top 7 in 2024. Compared to the forecast at the end of 2023, the new construction pipeline has been reduced by around 300,000 square metres due to construction stops or delays. For the years 2025 and 2026, a noticeable slowdown is expected with completion volumes of around 1.6 million square meters and 1.2 million square meters.
The high volume of completions combined with subdued demand is leading to rising vacancies. We expect this trend to continue until 2026 and then we will peak at a level of 7.9 percent on average in the top 7.
vacancy rate in the Top 7 (+30 bps qoq)
Construction activity will decline noticeably in the coming years and is subject to a high degree of uncertainty in view of numerous insolvencies and construction delays in project developments. This will lead to planned projects not being available for the office market, or at least not on schedule. We therefore expect a noticeable shortage of supply for modern office space that meets current user requirements for modern office concepts and ESG criteria in the short to medium term.
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
Prime rents continued to rise year-on-year in five of the top 7 locations. With an increase of more than 14 percent, Munich leads the pack. Here, the 50 euro mark for prime rents was already exceeded in the first quarter. In Düsseldorf, too, the increase in prime rents was in the double-digit range (10.5 percent). In Stuttgart, the prime rent has 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.
Compared to prime rents, average rents are less dynamic and more heterogeneous. In Stuttgart, the average rent rose by around 5 percent compared to the same quarter last year. In the other top 7 locations, average rents were largely stable in the range of -3 percent to +2 percent.
Outlook: Market recovery from low level continues in H2 2024, structural headwinds remain
The slight recovery of the office leasing market in the second quarter coincides with the slight brightening observed in the economic environment. Looking at the relevant leading indicators and forecasts, we expect this slightly positive momentum to continue in the second half of the year and especially in the course of 2025. However, there is still no economic tailwind for a strong revival of market activity. The structural headwind caused by the realignment of office concepts in the wake of working from home quotas that have now stabilized will remain in the coming years.
The office rental market has now arrived in the post pandemic era. In view of the structural changes and the economic situation, a continuation of the take-up of the pre pandemic years is not to be expected.
We expect the slight recovery from the second quarter to continue in the course of the second half of the year. For 2024 as a whole, we continue to believe that take-up of up to 2.5 million square metres is possible on the basis of currently active applications, and thus a slight increase of 4 per cent compared to 2023 as a whole.
Office leasing market data
| Berlin | Dusseldorf | Frankfurt | Hamburg | Cologne | Munich | Stuttgart | |
|---|---|---|---|---|---|---|---|
| Take-up Q1-Q2 2024 in sqm | 295,600 | 105,000 | 184,400 | 195,200 | 56,500 | 296,100 | 95,500 |
| Take-up Q1-Q2 2024 in sqm | 256,000 | 84,300 | 185,300 | 299,400 | 79,000 | 237,200 | 62,800 |
| Change in % | 11.6% | 24.6% | -0.5% | -14.9% | -28.5% | 24.9% | 52.1% |
| Prime Rent Q2 2024 in €/sqm | 44.70 | 42.00 | 48.00 | 35.00 | 31.50 | 51.50 | 35.00 |
| Prime Rent Q2 2024 in €/sqm | 43.90 | 38.00 | 46,00 | 33.50 | 34.00 | 45.00 | 35.00 |
| Change in % | 1.8% | 10.5% | 4.3% | 4.5% | -7.4% | 14.4% | 0.0% |
| Average Rent Q2 2024 in €/sqm | 82.70 | 20.70 | 24.50 | 20.20 | 18.46 | 24.00 | 19.20 |
| Average Rent Q2 2023 in €/sqm | 29.10 | 21.00 | 24.00 | 20.50 | 18.02 | 24.80 | 18.13 |
| Change in % | -1.4% | -1.4% | 2.1% | -1.5% | 2.2% | -3.2% | 4.9% |
| Vacant Space Q2 2024 in sqm | 1,560,600 | 678,000 | 1,133,500 | 604,000 | 304,700 | 1,758,900 | 455,200 |
| Vacant Space Q2 2023 in sqm | 915,300 | 606,900 | 1,092,900 | 518,900 | 231,400 | 1,339,000 | 398,500 |
| Vacancy Rate Q2 2024 in % | 6.8% | 8.4% | 9.8% | 4.2% | 3.8% | 7.5% | 5.3% |
Data as of Q2 2024
Industrial and logistics real estate market slightly above previous year’s level
The German industrial and logistics real estate market generated take-up of around 2.6 million square metres in the first half of the year. This corresponds to an increase of 13 percent compared to the previous year. The German TOP 8 industrial and logistics real estate markets generated take-up of around 956,000 square metres, which corresponds to an increase of 5 per cent compared to the previous year. The five-year average, however, was missed by around 28 percent.
of taktake-up in industrial & logistics
Since the end of last year, we have been seeing a slight decline in take-up per quarter. The second quarter was also somewhat weaker than the first. The number of inquiries has decreased due to the slowdown in demand momentum that we have already seen in the course of 2023.
This is due, among other things, to the economic uncertainties of recent quarters, the continued subdued consumption behaviour and the shortage of space in certain regions. While we see significantly less demand in the large-volume sector, there is demand for small-scale space in the business park segment in particular. This is also reflected in the number of deals, which increased by 10 percent compared to the previous year and ensured a slightly positive result on the rental market. However, due to the regionally different dynamics, the location assessment is particularly important.
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, while the other four recorded a decrease. The highest take-up was recorded in Frankfurt with 199,000 square metres, the lowest in Stuttgart with 63,700 square metres. Cologne was able to more than double its take-up compared to the previous year and showed the largest increase in take-up. In Leipzig, on the other hand, take-up fell the most sharply and is more than a third below the previous year’s figure.
In the first half of the year, the focus of 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 accounted for around 24 per cent of take-up in the TOP 8 regions. The largest share of take-up was accounted for by deals in the range of 5,000 to 10,000 square metres at 31 per cent. The largest deal in the first half of the year 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 second quarter and also done by an owner-occupier. This was a logistics service provider that settled northeast of Frankfurt in a logistics facility of around 31,000 square meters. The largest lettings in the second quarter took place in the logistics regions of Cologne and Düsseldorf, where three companies leased existing warehouses of 10,000 square metres each.
The strongest user group in the first half of the year was logistics service providers, with a share of 35 percent of total take-up, followed by retail companies with 30 percent and the manufacturing industry with 18 percent.
It is true that the distribution of user groups by number of deals is fairly balanced, so we can speak of a healthy mix of demand. Nevertheless, the general market sentiment on the part of users is subdued.
Industrial companies in particular have to contend with structural changes and cyclical fluctuations, which in turn influences the order situation of contract logistics companies. In addition, media reports that established industrial companies are deciding not to locate in Germany are fuelling general uncertainty.
Prime rents stabilise at quarterly level
Prime rents in the TOP 8 logistics regions have remained stable compared to the first quarter, but recorded average rent growth of 6 percent compared to the previous year. Munich continues to have the highest prime rent at 9.30 euros per square metre, while Leipzig brings up the rear at 5.80 euros per square metre. Compared to the previous year, Hamburg was able to achieve the highest rent growth in prime rents at 11 percent. Berlin and Cologne, on the other hand, have the lowest growth at 3 percent.
prime rental growth in the TOP 8
After a sharp increase in rents in recent years, we are now experiencing a breather. Although we see that asking rents remain stable, we also see that incentives are playing a role again and landlords and tenants are increasingly entering into negotiations. We expect rents to remain stable in the coming months.
Industrial and logistics leasing market data
| Top 8 | Berlin / Brandenburg | Dusseldorf | Frankfurt / Rhine-Main | Hamburg | Cologne | Leipzig | Munich | Stuttgart | |
|---|---|---|---|---|---|---|---|---|---|
| Take-up Q2 2024 in qm | 956,000 | 111,100 | 86,800 | 199,000 | 143,600 | 139,400 | 107,700 | 104,600 | 63,700 |
| Change year- on-year in % | 5% | -5% | -19% | 68% | -17% | 124% | -39% | 5% | 17% |
| Leasing take- up Q2 2024 in qm | 111,100 | 71,800 | 158,000 | 127,700 | 118,900 | 36,600 | 44,600 | 63,700 | |
| Change year- on-year in % | -5% | -27% | 37% | -15% | 91% | -78% | -55% | 17% | |
| Forecast for take-up end of year 2024 | |||||||||
| Number of deals | 257 | 40 | 31 | 41 | 43 | 30 | 17 | 30 | 25 |
| Average size per deal | 3.720 | 2.778 | 2.800 | 4.854 | 3.340 | 4.647 | 6.335 | 3.487 | 2.548 |
| Most important sector | Logistics service providers | 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 | 9.30 | 8.30 | |
| Forecast end of year 2024 | |||||||||
| Average rent in EUR/qm | 7.00 | 6.70 | 6.40 | 6.70 | 6.00 | 5.30 | 8.40 | 7.00 | |
| Forecast end of year 2024 |
Data as of Q2 2024