The Berlin office space market has charted a record result for the second year in succession. Last year's very strong showing of 685,000 sqm of total rented office space was eclipsed in 2012 with a floor space turnover of 693,000 sqm. The rental volume for 2012 is therefore 47% above the average for the last ten years. In the second and third quarters in particular, Berlin companies proved very active in terms of leasing. Floor space turnover stood at an above-average 190,000 sqm over the two summer quarters. A solid result was achieved at the end of the year too, however, with a quarterly turnover of 173,000 sqm.
According to the international real estate services advisor Cushman & Wakefield (C&W), the Berlin office space market showed itself to be highly stable in all size segments. As in the previous year, contracts involving rental spaces under 1,000 sqm made up some 41% of rental turnover. Leasing activity in the other size segments was similarly stable. Rental dealing in the +5,000 sqm size segment was especially constant. These large-space contracts once again contributed 31% to the annual total.
“A shift must be pointed out in this regard, however”, adds Lisa Ebert from the Berlin office rental space department at C&W. “Whilst we recorded four contracts north of the 10,000 sqm mark in 2011 totaling 103,400 sqm, this was ten contracts over the past twelve months with a total volume of 170,400 sqm. This is a decidedly positive sign for the metropolis, as it was not only public institutions – which are traditionally important for Berlin – that concluded several large-space rental agreements this year, but also the consultancy firm PricewaterhouseCoopers (24,400 sqm) and Zalando, the rising star of the online scene. The online mail order company concluded three deals north of the 10,000 sqm mark over the past year alone (a total of 58,900 sqm), and, in so doing, very clearly tied itself to its home location in Berlin for the long term”.
The extensive rental activity of Zalando in particular allowed the market share of commercial enterprises to climb to an above-average 13% (92,400 sqm). Commerce thus took a leading position in terms of floor space turnover – even ahead of the public sector with 12% (83,900 sqm) and consultancy firms who contributed 10% (67,000 sqm) to the annual turnover. Important contributions to turnover in 2012 continued to be made by institutions from the fields of education, social services (10%) and companies from IT/EDP and communications (8%). “With annual turnovers in part significantly above the 50,000 sqm mark, the IT sector has developed into a stable size on the Berlin market over the past three years”, explains Ebert. “Combined with Berlin’s so-called ‘creative scene’, the companies and start-ups from the IT sector are ensuring that the capital now enjoys the reputation of a second Silicon Valley, way beyond the borders of Germany, too.”
Vacancy rate falls again
The Berlin vacancy rate has fallen in each quarter of the last two years. It currently stands at 7% (December 2011: 7.8%). At the end of 2012, the total stock of office space in Berlin amounted to 17.54 million sqm, of which 1.23 million sqm were available for short-term lease. “We are expecting a continuation of this downward trend in 2013”, states Ebert. “The building completion volume may climb only slightly over the coming year to 138,000 sqm. As of now, approximately 50% of this has already been pre-leased.
If the Berlin market continues to be as active as it has been over the past months – and there is much to indicate that it will be – then the volume of available space will also fall”. Directing her attention towards the qualities of the space in offices currently vacant, the consultant continues: “Anyone now looking for modern office space with a rental area of over 2,000 sqm won’t hit the jackpot too quickly. At the moment, the Berlin market simply doesn’t have stock of such floor space in sufficient volumes. The first companies that came to this conclusion and signed rental contracts in project developments are, for example, PricewaterhouseCoopers at Kapellenufer (24,400 sqm) and Zalando at the “Hotel & Office Campus” in Friedrichshain (19,200 sqm)”.
In total 111,000 sqm of new office space was completed in the federal capital last year.
Prime rent on upward trajectory
In the final quarter of 2012, the prime rent rose from € 21.50 per sqm per month to € 22.00 per sqm per month; and it may also stay on a slight upward trajectory through the coming year in view of the continued dearth of available space in the high-quality segment. Berlin rental price levels appear to be altogether very stable in all sub-markets.
“We are anticipating the coming twelve months on the Berlin office space market with cautious optimism”, explains Lisa Ebert. “At the start of the new year, the German economy appeared to be on a sound footing, and Berlin-based companies did not prove to be too affected over the past months by the altogether negative economic outlook. Although it appears unlikely that as many large transactions will be able to be concluded as successfully again in 2013, we still feel, one way or another, that the Berlin market – which is currently set up pretty well – will achieve another great result over the 500,000 sqm mark once again this coming year”.