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Munich's office market takes top position at mid-year

332,000 m² of take-up in the first half of the year – Vacancy rate continues to fall – prime rents remain stable at EUR 33.50 per m²/month

By the close of the first half of 2015, the office space market in Munich recorded impressive take-up of 332,000 m². This figure lies 12% above that of the same period last year and moves Munich into an impressive first place in the league of German office locations. The second quarter contributed 150,000 m² of letting (including owner occupiers) to the strong half-year result. After a dynamic start to the year, the office space market in Munich has proven to be stable at a high level.

Hubert Keyl, head of the Munich branch of international real estate consultancy Cushman & Wakefield (C&W), attributes only a small share of the take-up to the size segment in excess of 5,000 m²: “Although some leases for areas in excess of 5,000 m² were recorded in the Munich Market, such as that of Barmer GEK in Landsberger Straße (around 5,000 m²), the number of lettings in this size segment is low – even though there are requests for 10,000 m² or more in the market.” As in the first quarter, the market was dominated by deals in the small and medium-sized segments. According to C&W, the amount of take up accounted for by leases for less than 1,000 m² comprised around 47% of the total in the second quarter. As in the first quarter, medium-sized spaces continued to represent a key segment, with spaces between 1,000 and 3,000 m² accounting for around 29% of take-up.

Demand by sector in Munich's office market has retained its customary balance, although a higher share was again attributed to the IT and communications sectors in this quarter. As in previous quarters, this sector is once again the strongest, contributing around 22% of total take-up. As Munich is Germany's prime location for the technology sector and is one of the most attractive media locations in the country, Keyl sees good reason for the increasing demand from IT companies in the city's CBD. A similarly high share of take-up this quarter could be attributed to the administrative offices of industrial companies. The key transaction in this segment was the lease signed by US office furniture manufacturer Steelcase for 14,00 m² in the Brienner Forum in Richard-Wagner-Straße. This also represented the largest deal in terms of floor space in the Munich office market.

With 50,000 m² of take up space, the city centre (Innenstadt) was once again the most popular submarket in the Munich office market, followed by the west of the city, which recorded take-up of 35,300 m².

Although prime rents in individual submarkets of the Bavarian capital remain stable, the South city area recorded an increase in the prime rents to

EUR 17.00 per m²/month. Following an increase at the start of the year, the absolute prime rental level paid in Munich remains at EUR 33.50 per m²/month. This represents an increase of EUR 1.00 per m²/month or 3% on the same period in the previous year. There are also indications of an upward trend in rents in Munich's outskirts, which Keyl believes to be exhibiting upward pressure.

The completion volume in the first half of the year amounted to 153,000 m². Of the approx. 279,000 m² of space currently under construction, around 131,000 m² is expected to be completed during the course of the current year. There was therefore no discernable increase in building activity in this quarter.

The ongoing reduction in vacancy rates also continued in Munich in the second quarter. Of a total office stock of 20.4 million m², the vacancy rate was recorded at 5.9%.

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