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Frankfurt office market: Well placed for the second half

Lease volumes for first half of year at 154,000 m²  |  Available space at lowest level since 2003  |  Top lease price stable  |  Further market upturn expected in the second half of the year

The office market in Frankfurt (including the districts of Eschborn and Offenbach-Kaiserlei) is entering the second half of the year with a turnover of 154,000 m². The half-year results for 2014 are therefore almost 20% below the previous year (192,000 m²) and 19% under the ten-year average (190,300 m²). Although the lease for 30,000 m² taken out by Deutsche Bank was recorded in the first quarter of 2014, no contracts for areas in excess of 5,000 m² were entered into in the second quarter. As a result, turnover fell from 86,000 m² in the first quarter to 68,000 m² in the second. Of this, 4,000 m² was attributed to a sole owner-occupier.

According to international commercial real estate consultancy Cushman & Wakefield (C&W), the market in Frankfurt is nonetheless active. The current quarterly result was largely attributable to transactions in the size segment between 1,000 m² and 3,000 m². Over the past quarter, 17 lease contracts were concluded in this segment for a total of 25,000 m² (36% market share). As a result, the number of leases and the lease volume in this size category doubled compared to the first quarter. “We expect a continued upturn in market activity for the second half of the year,” said Dennis Stern, Head of the Office Space Leasing department at Cushman & Wakefield in Frankfurt. “We are registering a large number of enquiries in the market, including enquiries for large volumes, and it is highly probable that we will see a significant number of new lease agreements over the coming six months.”

The vacancy rate in the Frankfurt market area has fallen once again. At the end of June, around 1.42 million m² office space was available on a short-term basis from a total stock of 12.13 million m². The available space has therefore fallen by 132,100 m² over the past 12 months and stood at 11.7 % at the end of June. This is the lowest figure for the last eleven years, and was last recorded in the second half of 2003.

Investors and developers have continued to actively address the issue of structural vacancy over the second quarter. Following the removal of 94,000 m² of vacant office space from the market in the first quarter, the figure for the second half stood at 74,300, of which around 60,000 m² is to be converted for residential, hotel, or residential care purposes. “Over the last five and a half years, around 800,000 m² office space has been withdrawn from the market for demolition, repurposing or extensive renovation,” said Inga Schwarz, Head of Research at Cushman & Wakefield in Germany. “The proactive and creative approach to long-term vacancy taken by the players in Frankfurt is therefore streets ahead of the situation in other German office centres.”

In the first half of the year, 165.600 m² of new office space was completed (second quarter: 61.000 m²). A total of 265,400 m² is currently under construction (including the new ECB buildings at 104,000 m²), of which 137.800 m² is expected to be completed in 2014. 

The top-level lease price remains stable at EUR 37 per m²/month. A lateral movement in the peak lease is expected for the second half of the year.