DThe brokers reported the largest office rental of 2023 in November: DWP Bank will occupy around 12,500 square meters of office space in a building that is currently being renovated. Bucking the trend of companies preferring central locations, the financial institution has decided to take a different approach. It will move from the Bockenheim district of Frankfurt to Eschborn in 2026. The second largest rental of the year, 12,000 square meters for a still unknown industrial company in the Gateway Gardens commercial area at the airport, is also not in the city.
Nevertheless, the banking district dominated the office market last year with a turnover of around 47,000 square meters. According to the brokerage firm NAI Apollo, this is followed by Eschborn (42,600 square meters), Messe/Europaviertel (33,700 square meters) and the Westend (29,400 square meters). Modern areas in central locations that are as ecologically sustainable as possible remain in high demand. In return, users are willing to pay higher rents. This development is leading to rising prime rents. NAI Apollo sees them at 47.50 per square meter, 1.50 euros more than last year.
In total, the brokers in Frankfurt, Eschborn and Offenbach-Kaiserlei recorded rentals with a total volume of 357,800 square meters. This means that the long-term average is a quarter below the average. In the recent past, only the annual balance of the Corona year 2020 was worse. Martin Angersbach from NAI Apollo is not surprised by this result and points to the “mixture of economic slump, high inflation and interest rates and supposed political uncertainty”. The shortage of skilled workers also contributes to this.
“The bottom has passed”
The brokers are still confident for 2024. Angersbach assumes that the economic bottom has already been passed. At the banks in Frankfurt, an increase in employees of 1.3 percent is expected by the end of 2024. This could result in positive impulses for the office market. In his opinion, a “moderate market recovery” is likely to occur in the second half of the year. There are some requests for large rental spaces. However, Björn Holzwarth from the broker network German Property Partners (GPP) warns: “If geopolitical crises and inflation increase again, this would slow down market development even more.”
This uncertainty primarily affects new construction projects. Many projects and plans have been stopped or postponed indefinitely, says Konrad Kanzler from NAI Apollo. Only around 138,000 square meters of new office space was completed in 2023. 38 percent of them are not yet rented. This year, Kanzler expects only 130,000 square meters to come onto the market.
According to market observers, the vacancy rate has stabilized. According to NAI Apollo, at the end of the year it was 1.04 million square meters, which is 175,000 square meters more than a year ago. This means that there are currently no users for nine percent of the office space. GPP sees the vacancy at 1.13 million square meters and also cites a rate of nine percent. This year, “the available office space that can be rented on a short-term basis will most likely remain at a high level,” predicts the Chancellor. His colleague Michael Preuße adds: Because modern, sustainable space is particularly in demand, it is becoming increasingly difficult to reduce vacancies in buildings that do not meet these requirements.
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