Everything Within the Framework: Office Market in Germany

Everything Within the Framework: Office Market in Germany


Office
24.03.2021 Author/s: Alexander Fieback

Despite the severe economic slump in 2020, many contrary developments could be observed on the German real estate markets. For the office property market, the pandemic initially meant abruptly: home offices and a halt to expansion. However, there can be no talk of disruption. This is shown by the developments in vacancies, completions and office employees.

In order to be able to assess real estate markets, it is first of all essential to take a look at the economy. This influences the development of office employment and thus the office property market like no other factor. The economic forecast by bulwiengesa predicted a 5.4% decline in economic output in Germany in 2020, followed by a modest recovery in 2021 (3.9%) and 2022 (2.7%). The level of real gross domestic product (GDP) before the crisis will thus not be reached again until 2022. The fact is: there can be no talk of a general price collapse; on the contrary, property prices rose by 3.6 % in 2020.

Development of the vacancy rates
Development of the vacancy rates

Vacancy rates rising only moderately so far

Since 2010, office rents have risen, vacancy rates have tended towards zero in some cities, office space requests could hardly be met - supply shortages and extreme demand pressure were the buzzwords that still characterised the office metropolises at the beginning of 2020. For example, vacancy rates in Berlin and Munich were 1.3% and 1.4% respectively, while the average for all class A markets was around 2.9%. As is well known, healthy markets need fluctuation reserves; these were no longer present in many markets.

In the course of the high completion figures and flagging demand, vacancies rose slightly in 2020. However, the current value of 3.4% on average in the seven class A cities does not (yet) indicate a crisis-like development. In the long term, demand is expected to pick up as the economy recovers, so that current forecasts do not foresee a dramatic increase in vacancies in the class A cities.