City Survey
Q1 2024
Leasing Market
Subdued start to the year for the office leasing market in the top 7
In the seven largest office leasing markets in Germany, around 601,300 square metres of office space were taken up in the first quarter of 2024. This was around 2 percent below the previous year’s result.
As expected, the office market is off to a subdued start to 2024. The economic outlook remains gloomy, and geopolitical uncertainties remain. Against this backdrop, the continued reluctance among many companies in the first quarter of 2024 is hardly surprising. In the space segment between 1,000 square metres and 5,000 square metres, take-up fell by around 8 per cent compared to the same period of the previous year. In the large-scale market segment of more than 5,000 square metres, however, sales rose by almost 8 per cent despite a decline in the number of leases as a result of higher average sizes.
take-up in the Top 7
Office Space Take-up in the TOP 7 (in million sqm)
Forecast from 2024
Average Rents in the TOP 7 in €/sqm
Further increase in vacancies due to high construction activity
The vacancy rate continues the increase at the beginning of the year and currently stands at 6.4 percent in the top 7 (+20 basis points compared to the previous quarter). Compared to the previous year, this represents an increase of 120 basis points or over 1 million square meters. On the supply side, we expect around 1.8 million square metres of new office space to enter the market in the top 7 in 2024. Compared to the forecast from the fourth quarter of 2023, the new construction pipeline has been reduced by around 200,000 square meters, or around 10 percent, due to construction stops or delays. For the years 2025 and 2026, a noticeable slowdown in construction activity is to be expected, with completion volumes of around 1.5 million square meters and 1.1 million square meters.
vacancy rate in the Top 7 (+20 bps q-o-q)
The subdued demand for space is currently hitting the peak of construction activity in this market cycle. We therefore expect a continuous increase in the vacancy rate in the top 7 for the remainder of the year and beyond, peaking at a level of 7.9 percent in 2026.
In some top 7 locations, such as Frankfurt and Munich, a peak is expected as early as 2024. Since around 40 percent less new office space will come onto the market in 2026 than in 2024, we 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 undeterred upward trend
Prime rents rose again year-on-year in six of the top 7 locations. In Munich, the 50-euro mark was cracked with an increase of 17 percent compared to the previous year. The prime rent there is currently 51.50 euros per square metre. The chasing pack is led by Düsseldorf (+11 percent) and Stuttgart (+6 percent). In the other top 7 locations, prime rents rose by 2 percent to 5 percent. Cologne was the only location to record stable prime rents.
In terms of average rents, the development is more heterogeneous, with moderate growth in Stuttgart, Cologne, Frankfurt and Hamburg as well as stagnation or slight declines in the other locations.
Outlook: Positive economic impetus over the course of the year, structural headwinds remain
The growth prospects for the German economy for 2024 have recently been further reduced. The consensus currently expects low growth of 0.1 percent and a slight recovery in 2025 (1.1 percent).
The gloomy economic environment is also slowing down the office leasing market in Germany at the beginning of 2024. In view of the relevant leading indicators and forecasts, we do not expect positive impetus for the rental market until mid-2024 at the earliest. The realignment of office concepts in the context of home office ratios that have now stabilised will continue to create a structural headwind for the office leasing market in the medium term. In a recent analysis in collaboration with the Ifo Institute, we come to the conclusion that increased home office rates and the realignment of office concepts in the main scenario will reduce demand for space by around 12 percent by 2030.
Against this backdrop, a return to take-up from the pre-coronavirus years is not to be expected, even if the economic environment improves. For 2024 as a whole, we believe that take-up of up to 2.5 million square metres is possible, a slight increase of 4 per cent compared to 2023 as a whole, based on currently active applications.
Office leasing market data
| Berlin | Dusseldorf | Frankfurt | Hamburg | Cologne | Munich | Stuttgart | |
|---|---|---|---|---|---|---|---|
| Take-up Q1 2024 in sqm | 140,600 | 54,000 | 94,900 | 80,100 | 31,500 | 141,000 | 59,200 |
| Take-up Q1 2024 in sqm | 153,000 | 55,000 | 90,020 | 102,100 | 50,000 | 121,700 | 38,900 |
| Change in % | -8.1% | -1.8% | 5.4% | -21.5% | -37.0% | 15.9% | 52.2% |
| Prime Rent Q1 2024 in €/sqm | 44.70 | 42.00 | 48.00 | 34.50 | 34.00 | 51.50 | 35.00 |
| Prime Rent Q1 2024 in €/sqm | 43.70 | 38.00 | 46,00 | 33.50 | 34.00 | 44.00 | 33.00 |
| Change in % | 2.3% | 10.5% | 4.4% | 3.0% | 15.30% | 17.1% | 6.1% |
| Average Rent Q1 2024 in €/sqm | 29.00 | 20.80 | 24.50 | 21.40 | 18.40 | 24.90 | 19.00 |
| Average Rent Q1 2023 in €/sqm | 29.75 | 21.00 | 24.00 | 21.00 | 18.00 | 24.80 | 18.10 |
| Change in % | -2.5% | -1.0% | 2.1% | 1.9% | 2.2% | 0.4% | 5.0% |
| Vacant Space Q1 2024 in sqm | 1,445,800 | 664,000 | 1,121,830 | 588,000 | 274,600 | 1,687,800 | 412,400 |
| Vacant Space Q1 2023 in sqm | 882,000 | 606,500 | 1,064,900 | 528,500 | 222,540 | 1,288,900 | 377,900 |
| Vacancy Rate Q1 2024 in % | 6.3% | 8.3% | 9.8% | 4.1 % | 3.3% | 7.3% | 4.9% |
Data as of Q1 2024
Industrial and logistics real estate market at the level of 2019/2020
In the first quarter of 2024, the German industrial and logistics real estate market generated take-up of around 1.2 million square metres. This corresponds to an increase of 8 percent compared to the previous year. It is noteworthy that the share of owner-occupiers has more than doubled to 25 percent compared to the previous year (12 percent).
Take-up of 510,000 square metres was generated in the German TOP-8 industrial and logistics real estate markets, which was on a par with 2019/2020 for the first quarter. Compared to the previous year, this corresponds to an increase of 28 percent. However, the five-year average was missed by 15 percent.
of take-up in industrial and logistics
In the course of 2023, we have already noticed a slowdown in demand momentum in the rental market. This effect continues to be visible in the first quarter. Against the backdrop of weakening demand, users are increasingly focusing on prime locations.
For example, the share of the TOP-8 regions in the overall German take-up exceeded the five-year average (39 percent) and stood at 42 percent. Peripheral locations, on the other hand, are currently having a harder time, not least because of the increased toll fees and high transport costs that users have to take into account when choosing a location.
Five out of eight locations recorded an increase in take-up
Compared to the previous year, five of the TOP-8 industrial and logistics real estate markets recorded an increase in take-up. Despite the trend in recent years towards deals in the mid-range space segment, Munich and Cologne were even able to double their take-up compared to the previous year due to a number of large-volume deals. The highest take-up was recorded in Leipzig with 84,700 square metres (+69 per cent), closely followed by Frankfurt with 81,900 square metres (+29 per cent). Stuttgart brought up the rear in the first quarter with 22,600 square metres (-26 per cent).
In contrast to the previous year, there were again deals of more than 20,000 square metres in the first three months of 2024. In the first quarter, the five largest deals accounted for more than a third of total take-up. However, the focus of the users was primarily on the small-scale space segment of up to 3,000 square metres. Around two-thirds of all deals were made in this area and accounted for around 19 percent of total take-up. The largest deal in the first quarter was an owner-occupier settlement in the logistics region of Munich, in the northern surrounding area. There, GROUP7 broke ground for its 60,000 square meter logistics hall, which has driven up take-up in Munich disproportionately. The three largest lettings took place in the logistics regions of Frankfurt, Cologne and Leipzig, where two retail companies and a logistics service provider each leased space of around 30,000 square metres.
Logistics service providers were the strongest user group, accounting for 40 per cent of total take-up, followed by retail companies with 31 per cent and companies from the manufacturing industry with 16 per cent.
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 rent growth slows down
Compared to the previous year, the TOP 8 logistics regions recorded an average rental growth of 8 percent for prime rents and 10 percent for average rents. Munich has the highest prime rent at 9.30 euros/square metre (+9 per cent), followed by Stuttgart at 8.30 euros/square metre (+6 per cent), Hamburg at 8.25 euros/square metre (+15 per cent) and Frankfurt at 8.00 euros/square metre (+7 per cent). Berlin and Düsseldorf follow with prime rents of 7.90 euros/square metre (+3 per cent and +10 per cent respectively), closely followed by Cologne with 7.70 euros/square metre (+8 per cent). Leipzig brings up the rear with 5.80 euros/square metre (+7 percent).
average rental growth
We see that since last year, average rental growth has gradually slowed down and is losing momentum. In the long term, however, rents will rise, not least due to the low new construction pipeline, which will continue to decline in the future.
As project developers are less speculative about building due to economic conditions and weakening demand, the market will lack space in underserved locations, which in turn could increase competitive pressure for high-quality logistics space. Due to regionally differing dynamics, the assessment of the situation will thus come more to the fore again.
Industrial and logistics leasing market data
| Top 8 | Berlin / Brandenburg | Dusseldorf | Frankfurt / Rhine-Main | Hamburg | Cologne | Leipzig | Munich | Stuttgart | |
|---|---|---|---|---|---|---|---|---|---|
| Take-up Q1 2024 in qm | 510,000 | 54,100 | 40,500 | 81,900 | 73,700 | 75,100 | 84,700 | 77,200 | 22,600 |
| Change year- on-year in % | 28% | 2% | -4% | 29% | -17% | 120% | 69% | 103% | -26% |
| Leasing take- up Q1 2024 in qm | 54,100 | 37,500 | 81,900 | 67,800 | 65,100 | 64,700 | 17,200 | 22,600 | |
| Change year- on-year in % | 2% | 11% | 35% | -24% | 90% | 65% | -55% | -26% | |
| Forecast for take-up end of year 2024 | |||||||||
| Number of deals | 116 | 16 | 17 | 21 | 19 | 10 | 9 | 15 | 9 |
| Average size per deal | 4.397 | 3.381 | 2.382 | 3.900 | 3.879 | 7.510 | 9.411 | 5.147 | 2.511 |
| Most important sector | Logistics service providers | Retailers | Logistics service providers | Retailers | Logistics service providers | Retailers | Logistics service providers | Logistics service providers | Other users |
| 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 | 6.60 | 6.40 | 6.70 | 6.00 | 5.30 | 8.40 | 7.00 | |
| Forecast end of year 2024 |
Data as of Q1 2024