City of commuters: 60 per cent of employees subject to social insurance contributions in Stuttgart commute to their workplace from outside.
23.50 euros per month and square metre - a proud price for Stuttgart office tenants. Nevertheless, vacancy rates have been falling for years, which is also due to the special location in the valley basin. The neighbouring municipalities benefit from this. There is still no indication that the number of office employees is falling, and construction activity is not meeting demand either.
The study on the office property market in the Stuttgart region commissioned from us by Wirtschaftsförderung Region Stuttgart GmbH (WRS) together with the state capital Stuttgart shows: The corona pandemic has had hardly any impact on office rents in the Stuttgart region. In some cases they are still at historic highs. The study on the office property market is the third of its kind after 2007 and 2012. It was financially supported by municipalities and real estate players in the Stuttgart Region.
Stuttgart is home to more than 609,000 inhabitants, and anyone who knows the city knows: the topography makes the real estate market there special. Larger development sites are hardly available due to the basin location of Germany's seventh largest city. The 15 neighbouring municipalities of Böblingen, Ditzingen, Esslingen, Fellbach, Gerlingen, Korntal-Münchingen, Kornwestheim, Leinfelden-Echterdingen, Leonberg, Ludwigsburg, Neuhausen, Ostfildern, Sindelfingen and Waiblingen benefit indirectly from the lack of space in the city. They are of particular importance for the development of office space.
The Stuttgart economic area is characterised by the automotive industry (Daimler, Porsche), electrical engineering (Bosch) and the IT sector (HP). Although these companies are among the world market leaders, they are facing major structural challenges due to technological change and increasing competition from China and Silicon Valley.
Supply still does not meet demand
A total of almost 612,000 office workers are employed in the Stuttgart Region, which corresponds to an increase of 12 % or 79,000 employees since 2012. In our study, we surveyed the office space stock in over 3,000 buildings by address. This identified 16.88 million sqm of MFG in the Stuttgart region, of which 7.42 million sqm was in the urban area and 9.46 million sqm in the districts. The growth in floor space in the surrounding area was much more dynamic at 14.5 % than in the state capital at 5.3 %. In general, the districts are very important for Stuttgart's real estate market.
Despite positive development of the office space stock since 2012, demand in the region cannot be met. As a result, prime rents in many cities are still at historic highs. In 2020, the prime rent level in the state capital Stuttgart was 23.50 euros/sqm. In the region, prime rents in Kornwestheim and Gerlingen have increased the most, with growth of 20 % since 2013.
The vacancy rate in the study area fell from 5 % to 2 % between 2012 and March 2020. In 2020, an increase to around 3 % was then recorded - meaning that the vacancy rate is still well below a healthy fluctuation reserve.
Future office space requirements in the Stuttgart region up to 2030 are calculated at 1,392,000 sqm. The state capital accounts for slightly more than half of this. By 2024, a maximum of 870,000 sqm of new office space will be created in Stuttgart, the lion's share with 265,000 sqm of total lettable space in the Vaihingen office sub-area.
Corona-related effects rather minor
The long-term effects of the Corona crisis on Stuttgart's office property market are still unclear. So far there are no indications that the number of office employees will fall significantly. A fundamental collapse in demand for office space is therefore not to be expected. After the significant decline in turnover in 2020, higher demand is expected again in 2021. Nevertheless, it remains to be seen how the demand for office space in the region will develop in the area of tension between home office, modern workplace concepts and the challenges of digitalisation and structural change in the automotive industry.
The rapid development of prime rents, as we have observed since 2012, will probably slow down in the future. bulwiengesa forecasts only a slight increase of two percent by 2024. Further effects of the recession caused by Corona are to be expected in the project development sector - construction projects with low pre-letting rates in particular are currently being put on hold.
Note: Further information and the possibility to order the study can be found on the WRS website (in German language).
Contact person: Andreas Wiegner, Senior Consultant in Data Science & Research at bulwiengesa, wiegner [at] bulwiengesa.de