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Dynamic start to the year for Munich's office space market

Take-up of 182,000 m² in first quarter of 2015  |  Balanced distribution of lessee industries  |  Vacancy rate continues to fall  |  Top lease price stable at EUR 33.50 per m²/month

The office space market in Munich started 2015 with dynamic first quarter. The take-up of around 182,000 m² (including owner-occupiers) exceeded the five-year average by around 22%, making it the strongest opening quarter for take-up during this period. The average for the previous ten years was exceeded by around 12%. The market also developed well in comparison to more recent quarterly results, with a take-up rate around 12% above the result from the same quarter in the previous year (163,000 m²).

Hubert Keyl, head of the Munich branch of Cushman & Wakefield (C&W), gave a positive appraisal of market activity at the start of the year: “We have seen several large-scale leases in excess of 5,000 m² and there are still a number of enquiries for this size segment underway in the market. The large contribution of leases in the small and medium-sized segment to total turnover demonstrates the market diversity and that the Munich economy expects positive developments over the coming year. For the year as a whole, we expect to achieve a take-up of 650,000 m².”

According to international real estate consultants Cushman & Wakefield, the good start can primarily be attributed to the conclusion of agreements in the small and medium-sized segments. In the first quarter, the share of leases for spaces under 1,000 m² amounted to 41%. For the same period in the previous year, this segment had a share of 22%. The result for the traditionally dominant medium-sized segment was less surprising, with spaces between 1,000 and 3,000 m² accounting for around 26% of take-up.

The office space market in Munich continues to be characterised by a broad distribution of industries. As in the previous year, IT and communications were once again the strongest sector with a share of around 13% of total take-up. “We are seeing increasing demand from IT companies for office space in Munich's CBD. The price sensitivity of some of these market participants has subsided somewhat recently,” explained Hubert Keyl. With a share of 11% of total take-up, the public authorities also produced strong leasing results. This figure was boosted by the conclusion of an agreement for 10,100 m² (GFA) in Landsberger Strasse by the Department for Personnel and Organisation of the Regional Capital.

Since new developments in the Munich market tend to have high advance lease rates, it has proven difficult to meet the ongoing demand for office space that offers modern facilities and furnishings. Nonetheless, the top-level lease price remained stable following an increase in the previous quarter and currently stands at EUR 33.50/m²/month.

The completion volume amounted to 56,200 m². There is currently around 377,000 m² space under construction, of which around 220,000 m² is expected to be completed during the course of the current year. The office vacancy rate in Munich continued to fall. Around 1.24 million m² of office space is currently vacant, out of a total stock of 20.30 million m². This equates to a vacancy rate of 6.1%.