It is not only in Cologne that the construction cranes are turning. Investments in office properties in Germany's metropolises are traditionally very popular.
The recently published project developer study examined, among other things, the current and planned project developments on the office markets of the class A cities. Here you will find the most important results as well as our expert statements for Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart.
The Corona crisis put a slight damper on the office segment. After the partly very low vacancy rates in the seven German metropolises even allowed speculative project starts - without pre-letting - this type of office use was now questioned for the time being. Some office space users postponed new lettings for the time being for economic reasons alone, project planning was postponed into the future and new projects were not started. Overall, project space in the office segment increased by only 1.2 % (179,000 sqm) this year. This was significantly less than in previous years.
Berlin remains the most dynamic. Project space is also increasing again in Düsseldorf, Cologne and Hamburg. The trend reversed in Frankfurt, Munich and Stuttgart, where the volume of project space is now falling in each case.
Note: In the current study, project space refers to all projects that were completed or are scheduled for completion between 2018 and 2025 - i.e. completed projects and those under construction and in planning.
Office project developments in Berlin
There is currently 5.9 million sqm of project space in Berlin's office segment. Even taking into account Berlin's overall market size, this is an outstanding amount. So far, Berlin is also making up for the construction failures it had in the years before 2014. The growth rate of 9.2% or 493,000 sqm is again impressive in a city comparison. However, the federal capital has also lost momentum under the Corona crisis, so that numerous completions have not been absorbed as quickly as before.
Alexander Fieback, office expert for Berlin and Hamburg (fieback [at] bulwiengesa.de): "The continuing low vacancy rate in Berlin offers potential for project volumes to rise again in the short term. Central locations offer the greatest security, but there is also a lot of potential in decentralised locations. Here, a positive development depends on the respective micro-location characteristics."
Office project developments in Düsseldorf
The office buildings completed, under construction or in planning in Düsseldorf during the period under review are mainly located close to the city centre or in office locations such as the airport, Kennedydamm or Medienhafen. In the course of the Corona pandemic, there was a collapse in demand on the office letting market, which was accompanied by an increase in vacancies. Furthermore, the situation described above has already led to some shifts in completions.
Nicole Tietze, office expert for Cologne and Düsseldorf (tietze [at] bulwiengesa.de): "The debate about the effects of home office and ESG show that the requirements for offices as a place to work will change in general. Especially in Düsseldorf, innovative properties with corresponding qualities will continue to function."
Office project developments in Frankfurt
In Frankfurt, office completions are generally quite volatile. This is due, among other things, to the special office space structure with an above-average number of high-rise projects. After the last, particularly pronounced low in 2018, completion rates were higher again in 2019-2020. However, the Corona crisis has clouded the outlook somewhat. Office project space, i.e. recently completed projects as well as projects under construction and in planning, was -219 thousand sqm (-14.2%) lower than in the last academic year. In particular, a significantly lower volume of completions is expected for 2021 than was anticipated 12 months ago. Overall, Frankfurt's office project space now currently comprises 1.3 million sqm.
Anna Buchmann, office expert for Frankfurt/M. (buchmann [at] bulwiengesa.de): "Frankfurt occupies a special position in Germany due to its high-rise buildings. The project developments reinforce this even more. This is because around 45% of the space in the period under review is accounted for by high-rise developments, which are spatially concentrated primarily in the banking district and adjacent central locations such as the Europaviertel. Demand remains high there despite the noticeable effects of the Corona pandemic."
Office project developments in Hamburg
Hamburg office project space increased by 106 thousand sqm (5.0%). In particular, the increase in space in investor development (developments for own use) is causing this positive development: at 13.9 %, the growth in space here is outstanding and, in absolute terms, comparable with Berlin. In general, the pipeline of Hamburg's office market is characterised by very heterogeneous structures: large-scale projects, some with international standing, and many small-scale projects in city districts document the colourful mix of construction projects. The HafenCity, with its diverse potential, and the Altstadt/Neustadt, i.e. the city centre location of the city, which is hardly matched in its centrality even in Germany, continue to arouse the greatest interest among project developers.
Alexander Fieback, office expert for Hamburg and Berlin (fieback [at] bulwiengesa.de): "The Corona pandemic led to a decline in demand. Nevertheless, the office market in the Hanseatic city proved stable, as documented by the stable vacancy figures and the increased rents. These general conditions provide a good basis for project development activity, so increased momentum is expected in the short to medium term."
Office project developments in Cologne
The Cologne office market is one of the smaller locations within the seven class A cities. At 1.0 million sqm, the project area is the smallest in the period under review. Nevertheless, the Cologne office market has developed positively in recent years. A good letting situation - in conjunction with a moderate volume of new construction - has resulted in a vacancy rate below the fluctuation reserve. Consequently, new projects are being planned - almost 54 % of Cologne's office project space is currently in planning status.
Nicole Tietze, office expert for Cologne and Düsseldorf (tietze [at] bulwiengesa.de): "The Corona crisis has also left its mark on the Cologne office market. This is visible, among other things, in a slight increase in vacancies. Consequently, not all planned projects will actually be realised in the coming years."
Office project developments in Munich
Office projects in Munich are not only located close to the city centre, but also increasingly in outer sub-areas due to a lack of space. There is currently 2.5 million sqm of project space available on the market in the office segment. Office development space is declining moderately (-62,000 sqm, -2.5%). The strikingly high share of expected completions in 2023 is partly due to the current postponement of specific projects, which will only be built with corresponding pre-letting due to more restrictive lending.
Oliver Rohr, office expert for Munich (rohr [at] bulwiengesa.de): "The high completion figures will lead to a further easing on the supply side this year. How high the increase in vacancies will be depends on the development of demand for space. After a weak first half-year with only 175,000 sqm of office space transacted, larger applications or major deals in preparation allow an optimistic view of the future."
Office project developments in Stuttgart
The majority of the total project space (45%) is being developed for the office segment in Stuttgart. In this respect, the small market differs considerably from the other class A cities, where the residential segment dominates. A significant slump of 20.5 % can be observed in office project developments. For its office market size, Stuttgart has an above-average amount of office project space on the market. However, this does not automatically mean that a supply surplus is to be expected. With a current vacancy rate of 3.0 %, this is not to be expected in the foreseeable future.
Andreas Wiegner, office expert for Stuttgart (wiegner [at] bulwiengesa.de): "Take-up in Stuttgart has slumped the most as a result of the pandemic. Even at the end of the first half of 2021, there are still no signs of a recovery here; only slightly more than 50,000 sqm have already been taken up in 2021. Numerous projects are currently under construction on a speculative basis. These were either started before the start of the pandemic or were already very far advanced in the development process. An increase in vacancy is very likely, at least in the short term."
Note: Information on how to order the project developer study as well as further material can be found on our website. We also prepare evaluations for other segments and cities individually on request.
Contact person: Ellen Heinrich, project manager, heinrich [at] bulwiengesa.de