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Frankfurt Office Market not yet in full swing in the first half of year

Letting volume is at 192,000 m² at the end of June - Top rents are up - Empty properties are down

In the first half of 2013, the Frankfurt office space market didn't quite get back to full swing. At the end of June, there was total of 192,000 m² of newly let space. This shows a clear increase in lettings, from 62,000 m² in the first quarter to 130,000 m² in the second, but the result is still below average overall. The result was 17.9 % short of the five-year average of 233,800 m² and even the average of 212,500 m² over the last ten years is considerably higher than the latest surface area figures (+10.7 %). A fall of 14.3% must now be recorded compared with the sound half-year figures of 2012.

According to Cushman & Wakefield (C&W), the international consultancy firm for commercial property, a major contract in combination with a strong market in the small-sized area segment contributed considerably to the increase in turnover in the second quarter. "The conclusion of the contract with Commerzbank in Hausen for 46,000 m² of course made a considerable contribution to this increase in surface area turnover. Nevertheless, the Frankfurt market is sitting on a solid foundation all in all", explains Dennis Stern, Head of the Frankfurt Office Agency C&W. "The letting volume of areas over 5,000 m² is stable compared with the previous year (first half-year of 2013: 79,100 m²; first half year of 2012: 81,175 m²) and in the small-sized area segment, lettings are even up on the previous year. However, there is currently less movement in lettings of areas between 1,000 m² and 5,000 m². In this segment, the market is clearly behind its half-year result of 2012. We are assuming though that this market segment will pick up significantly as well in the second half of the year. We are also confident when it comes to major lettings. We continue to see some major requests in the market, which we expect to result in some successful deals later this year. We can count above all on some important contracts being signed in the premium segment in the next six months."

The number of empty properties in the Frankfurt market area (including Eschborn and Kaiserlei) fell again in the last quarter. At the end of June, this figure stood at 12.8%. Currently there is 1.55 million m² of space available for short-term letting. This is 74,000 m² less than in the previous half-year 2012. This trend looks set to continue in the second half of the year: By the end of 2013, 99,000 m² of new space is expected to be completed, of which only 10,000 m² is currently still available.

Building completions accounted for 129,000 m² of space in the last six months and, as such, this volume was considerably higher the half-year results of the previous year. In total, the building volume continues to be at a high level compared with the top 5 cities. There are currently around 392,000 m² under construction, including the headquarters of the European Central Bank (ECB) with 104,000 m², the Taunus Tour with 60,000 m² and St. Martin's Tower with 24,000 m².

Top rents were up in the last quarter to EUR 36.50 per m²/month.

"Although this half-year result was one of the weakest of the past years, we are optimistic for the second half of the year“, says Inga Schwarz, Head of the Research Department at C&W. "The German economy is on course and the Frankfurt market is moving. The key players are active and there are many deals - including large-area ones - in the pipeline. We are therefore expecting to see a market revival in the second half of the year. We also predict for 2013 an overall letting volume that will be on the move for the ten-year average."