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Frankfurt's office market records strong start to the new year

Leasing volume of 88,000 m² in first quarter | Vacancy rate continues to fall | Top lease price stable

Frankfurt's office market experienced a strong start to 2015. The total lease volume for the first quarter was 88,000 m², including 32,000 m² attributable to owner-occupiers. This places the office space turnover in the first quarter slightly above the previous year's level (86,000 m²) and within the long-term average. The five-year average was exceeded by 3.2%, with the figure almost matching the ten-year average (+0.3%).

According to international real estate consultants Cushman & Wakefield (C&W), the current quarterly results are primarily attributable to the owner-occupier transaction by Deutsche Vermögensberatung (DVAG). DVAG acquired the property at Windmühlstraße 14 in the railway station quarter and, following comprehensive renovation of the 32.000 m² space, intends to use it as the company head office. Apart from this transaction, no agreements were concluded in the large-scale segment, as was the case in the same quarter last year. During the first quarter, no new agreements were registered for space in excess of 5,000 m². The lease activity in the other size segments was also very similar to the first quarter of 2014. Once again, the segment for spaces of less than 1,000 m² generated a good third (34%) of total property turnover (first quarter 2014: 35%). Just under 30% was attributable to the conclusion of lease agreements for spaces between 1,000 m² and 5,000 m².

The vacancy rate in the Frankfurt market area has fallen once again. There is currently 1.32 million m² space available for short-term leasing. With the total space available amounting to 12.15 million m², this corresponds to a vacancy rate of 10.9% (first quarter 2014: 11.9%). A comprehensive reduction in office space, coupled with the strong lease performance in the first quarter, has once again contributed to a reduction in the vacancy volume. Over the past three months, a total of around 122,000 m² office space has been removed from the market for demolition and rebuilding, renovation or conversion to other uses.

The building completion volume in the first quarter amounted to 27,900 m². There is currently around 201,000 m² office space under construction, of which around 100,300 m² is expected to be completed in the coming year, including the St Martin Tower with 24,000 m².

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.

“The market is stable on the whole and several large-scale enquiries are underway that are highly likely to result in agreements being signed during the course of this year. With this in mind, we expect a solid development in Frankfurt's office market over the coming months,” said Dennis Stern, head of the Frankfurt Office Leasing team at Cushman & Wakefield.

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