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Spectacular start to the year for Berlin's office space market

Lease volume of 152,000 m² at the end of March | Vacancy rate falls | Top lease prices remain stable

Berlin's office market experienced a spectacular start to the new year. The new lease volume in the German capital totalled around 152,000 m² over the first three months. This represents the highest lease volume ever recorded for the first quarter in Berlin, with the current volume around 20% higher than the same period in the previous year (127,000 m²). These figures are even more impressive when viewed in light of the ten year average. Since 2004, the average new lease volume for the first quarter stands at 119,100 m², which is 52% below the office space volume for this year.

According to an analysis by international real estate consultancy organisation Cushman & Wakefield (C&W), three large-scale leases in excess of 10,000 m² had already been recorded between January and March 2014. Although Berlin is home to a broad selection of industries, the IT sector has developed into one of the strongest groups of lessees over recent years (and currently accounts for 25% of the total lease volume). It is thus hardly surprising that Internet search engine provider Idealo.de and Atos IT Solutions both accounted for leases in excess of 10,000 m² in the first quarter. The largest transaction in the first quarter is attributed to the network operator 50Hertz, which leased around 16,900 m² of office space in the City West submarket. By contract, public authorities hardly featured in the period to the end of March, although this is likely to change in the medium term.

The City West and City Ost submarkets are experiencing the highest demand from lessees and accounted for around half of total turnover in the Berlin market. “There is an overall high level of demand in Berlin,” says Gerald Dietzold, Head of Office Space Leasing at C&W, “However, there are too few suitable properties. The focus is already shifting more to project developments, which often start out with an advance lease level of at least 50%. A further consequence is the increased demand for peripheral areas.”

This development is also reflected in the lease prices, with the maximum lease price for office space remaining stable at EUR 22.00 per m²/month. On average, however, lease prices are trending slightly upwards. The good supply and demand situation in B and C locations will result in continued moderate increase in these areas.

The vacancy rate for office space is continuing to fall across the entire market. The vacancy rate has been decreasing since the end of 2010, and this trend continued in the first quarter of 2014. It currently stands at 6.4%, based on a total stock of office space of 17.7 million m².

In the first quarter, 27,800 m² of new office space was completed. This includes the modernisation of Bikini Berlin, which offers 17,000 m² office space. The 334,500 m² of space currently under construction includes 72,000 m² of office space in the new buildings of the German Federal Ministry of the Interior, which will be completed this year.