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Frankfurt's office market records slightly below-average new lease volume in 2013

Turnover of 451,000 m²  I  Significant lease extensions highlight appeal of this location  I  Premium lease price stable  I  Vacancy rate falls

A new lease volume of 451,000 m² was recorded for Frankfurt's office market in 2013. This figure is 3.6% below to the ten-year average of 467.800 m². Compared to the previous year's result of 510,000 m², the figure for 2013 represents an even larger fall of 11.6%. Despite the reduction in the level of new leases, an analysis of lease extensions shows that Frankfurt's office market is nonetheless active: 2013 saw 17 lease contract extensions over a total of 214,100 m² – the highest volume ever recorded in the market.

According to international real estate advisor Cushman & Wakefield (C&W), the fall in the lease volume can primarily be attributed to a lack of new contracts for spaces in excess of 10,000 m². Compared to 2012, the number of new contracts of this size halved to just four and the office area decreased by 31% to 89,600 m². Significantly fewer contracts were also concluded for properties of between 1,000 m² and 3,000 m². A fall of 48% in the number of new contracts was coupled with a reduction in turnover volumes to 67,800 m² (2012: 130,300 m²). Stable to slightly increased lease figures were recorded in all other size categories.

Once again, banks and financial service providers made up the most important group of lessees in Frankfurt, accounting for a total of 127,600 m² in new leases or a market share of 28% (2012: 55,300 m² and 17% market share). This above-average lease volume was primarily driven by large-scale leases on the part of Commerzbank (46,000 m²) and Universal-Investment (11,000 m²). A number of office space contracts were also recorded in the mid-size segment. These were joined by large-area lease extensions by the European Central Bank (48.000 m²) and Deutsche Bank (11,100 m²). “This is a ringing endorsement for Frankfurt as a banking hub,” said Dennis Stern, Head of the Office Space Leasing department at Cushman & Wakefield in Frankfurt. “Banks and financial service providers are committed to Frankfurt as a location. And the establishment of the banking supervision arm of the ECB in the city sends a further clear signal about Frankfurt's significance as a banking centre.” The information and communication sector remains strong, with a property turnover of 54,000 m² (12% market share), together with legal firms and notaries at 50,000 m² (11% market share).

Vacancy rate falls

A further reduction in the vacancy rate was recorded at the end of 2013. Based on a total office space stock of 12.09 million m², the vacancy rate stood at 12.4% at the end of December (December 2012: 13.2 %). Around 1.50 million m² of space was available on a short-term basis at the end of 2013.

Compared to the previous year, the volume of competed new developments rose significantly by 83% to 164,000 m². There is currently 396,800 m² of new office space under construction, of which 296,000 m² is expected to be completed in 2014. Among other developments, this year will see the completion of the new offices of the ECB in the Ostend district, and the Taunusturm building with an office lease area of 60,000 m².

Top lease price remains stable

During the course of the year, the peak lease price increased from EUR 34.00 per m²/month to EUR 37.00 per m²/month, driven in particular by advance lease agreements for the Taunusturm building. Further increases in the maximum lease price are not currently expected over the coming months.

“Our outlook for 2014 is optimistic. Frankfurt is well placed as a financial centre and the German economy is back on course,” says Inga Schwarz, Head of Research at Cushman & Wakefield. “With this in mind, we expect to record lease volumes in line with the ten-year average for the city over the coming year.”