Full-year turnover of 601,000 m² for 2014 | Vacancy rate falls again | Top lease price rises to EUR 33.50 per m²/month
By the close of 2014, Munich's market for office space had recorded a turnover volume of 601,000 m² (including owner-occupiers). From a long-term perspective, this figure lies around 9% below the five-year average and 8% below the ten-year average. It did, however, represent an improvement on the previous year's result of around 597,000 m². The year-on-year increase can primarily be attributed to a revitalised fourth quarter, which accounted for a lease volume of around 199,000 m² and significantly exceeded the modest results from the previous two quarters.
According to international commercial real estate consultancy Cushman & Wakefield (C&W), however, it would be a mistake to equate the low turnover volumes from the preceding months with a low level of market activity. As Hubert Keyl head of Cushman & Wakefield's Munich office confirmed: ”Munich's office market remained very active throughout the whole of 2014. We did not, however, see a large number of contracts agreed for spaces in excess of 10,000 m², which had been a decisive factor for the lease results over the previous years. The largest contract concluded this year remains the advance lease of around 21,000 m² by Brainlab in the first quarter. The largest lease agreed in the fourth quarter was the contract with Panasonic for around 11,100 m² in Epsilon.”
Over the last three months of 2014, the number of leases between 1,000 m² and 3,000 m² were once again the defining factor. The figure for this size segment was around 34% in the fourth quarter. For the year as a whole, the volume leased in this segment was around 202,000 m², likewise corresponding to a share of 34%.
The lease activity in 2014 was characterised by the customary strong distribution of industries, with the IT/communication sector taking the lead, as in previous quarters. For the year as a whole, this sector accounted for 18% of turnover in the Munich market area, followed by retail with 13%.
Vacancy rate falls
Compared to the same quarter last year, the vacancy rate for office space in Munich has continued to fall and currently lies at 6.3%. Around 1.27 million m² of office space is currently vacant, out of a total stock of 20.27 million m². The latter figure increased by around 0.7% over the past 12 months, based on a completion volume of 201,000 m². A further 301,000 m² is currently under construction, of which around 240,000 m² is expected to be complete in 2015.
Since new developments tend to have higher advance lease rates, it is barely possible to meet the ongoing demand for office space with modern facilities and furnishings. This resulted in a further adjustment to the top level lease price in the fourth quarter of 2014, which now stands at EUR 33.50 m²/month or EUR 1.50 m²/month higher than last year. The top lease price was achieved for premium office premises in city centre locations.
For 2015, Hubert Keyl expects to see office space turnover at the previous year's level: “The Bavarian state capital lies at the heart of a strong economic region. Assuming that economic development remain stable, we expect to see continued high demand for office space in Germany's largest office market.”