Lease volumes of 86,000 m² in the first quarter | Fall in vacancy rate | Peak leases stable | Continued decrease in available space | Top-level lease price remains table
Frankfurt's office market experienced a strong start to 2014. In the first quarter, the new lease volume amounted to 86,000 m² of office space. The result for the current quarter is therefore 39% above the weak start experienced in 2013 (62,000 m²). An analysis of the first quarter results for the past ten years further emphasises the strong results, with the average property turnover for the past decade coming in at 84,700 m².
According to international commercial real estate services organisation Cushman & Wakefield (C&W), the advance leasing of 32,000 m² from Tishman Speyer to Deutsche Bank in connection with the Main Zero project made a key contribution to the quarterly results. Dennis Stern, Head of the Office Space Leasing at C&W in Frankfurt, explains: “Apart from the advance lease taken out by Deutsche Bank, we have not yet recorded the conclusion of any agreements in the large-scale segment. We expect the market to pick up significantly in this area over the coming months. The number of new leases taken out for spaces of less than 3,000 m² remains stable. As in the previous year, over 44,000 m² was leased out in this segment.”
Available space continues to fall
The supply of office space in Frankfurt has fallen once again. At the end of March, around 1.44 million m² office space was available on a short-term basis from a total stock of 12.1 million m². Compared to the corresponding period in the previous year, the vacancy rate has fallen by 124,000 m². Whereas the vacancy rate for March 2013 stood at 13%, it is now 11.9% in spring 2014. “This development cannot be attributed solely to the overall strong lease activity in the Frankfurt market,” says Inga Schwarz, Head of Research at C&W in Germany. “Frankfurt should be the market in Germany in which project developers and investors most actively counter the problem of structural lease vacancies. We have observed the reduction in space in this market area for a long time now, but the volume being withdrawn from the market appears particularly high this quarter. This primarily relates to office space that has not been leased out for at least three years, which therefore counts toward the vacancy rate, and that is to be demolished, repurposed or subjected to large-scale refurbishment. In the first quarter, 94,000 m² of vacant office space was removed from the market. Of this, 54,200 m² will be redeveloped for residential or hotel use. This is an entirely new situation for us.”
In the first quarter, 104,600 m² of new office space was completed. This included the Taunusturm with 60,200 m² and T11 with 9,700 m², both located in the banking quarter. A total of 301,500 m² is currently under construction (including the new ECB building at 104,000 m²), of which 192,400 m² is expected to be completed this year.
Top lease price remains stable
The top-level lease price remains at 37 euro per m²/month. A lateral movement in the peak lease is expected over the remaining course of the year.
“We expect the strong developments in Frankfurt's office market to continue over the coming months. Annual turnover in excess of the previous years's result of 451,000 m² appears highly probable based on our current data,” says Inga Schwarz.