savills-office market germany q3 2018

Publication

Market in MInutes - Germany office markets Q4 2018

Supply even scarcer – rents rising unabated – no relief before 2020

  • Vacant office space in the top six office lettings markets totalled 3.15 million sq m at the end of 2018, while take-up was broadly in line with the five-year average (Graph 5). The vacancy rate at the end of 2018 stood at 3.7%, 20 basis points lower than in the previous quarter. The lowest vacancy rate is currently found in Berlin with 1.5% (Table 1).
  • Rental levels increased significantly last year owing to continued high demand and low levels of supply. On average, the prime rent across the top six markets rose by 4.2% to €31.47 per sq m/month, while the average rent increased by 6.8% to €17.72 per sq m/month.
  • Trends in rents and vacancies were also so significant in 2018 since there was no noticeable relief from completions of new office space. The completion volume of just below 850,000 sq m in 2018 was below the five-year average of approximately 900,000 sq m and marginally higher than the previous year’s level (Graph 9).
  • Based upon the economic outlook, growth in demand is likely to be weaker in 2019 than last year. While the completion volume is expected to rise to 1.2 million sq m in 2019, more than two thirds of this space is already let. Hence, the vacancy rate will fall further. Rental growth is also expected to continue, with rents across the top six cities increasing by an average of around 4% (Graph 6). The strained market situation is unlikely to witness any relief before 2020, when the completion volume will increase to more than 1.9 million sq m.