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News Release


German office lettings market achieves record take-up in 2015 - Will the momentum be maintained in 2016?

​Short commentary German letting market including overview table [PDF]


FRANKFURT, 7th January 2016 – At the end of 2015, the German economy could probably be best described as robust but with restrained growth. Positive aspects outweigh the negative, yet are almost uniformly accompanied by an unmistakable “but”. This is because the political, europolitical, geopolitical and socio-political risks at the beginning of 2016 are also cutting at least a swathe through our political reality. It is of course an important message for the export-oriented German economy that the recession in Russia and in some emerging markets appears to have been overcome, and that Europe is also gradually climbing out of its economic trough. Also not forgetting the strong economic data from the United States and the United Kingdom. However, perhaps the UK poses the greatest threat this year should the British people use the planned referendum to vote against remaining in the European Union. Added to this is the ongoing uncertainty about the future economic development in China. At any rate, the collapse of the stock market on the first trading day of the year raised serious doubts that the weakness in the giant Chinese economy has been overcome. These are just two of the numerous uncertainties and risks that lie in wait for 2016. The DAX reflected the general nervousness of the financial markets when it fell more than 4% in one day in reaction to the reports from China. This is one reason why the economic forecasts from the experts are cautiously optimistic. After increasing by 1.7% last year, the German economy is expected to grow by a further 1.8% in 2016 according to Consensus Economics. The fundamental situation of companies and households is still positive and remains the basis for further growth. The resulting positive effect on employment and wage growth stimulates consumption, and private consumption will more than ever before become one of the supporting pillars of the German economy. At the start of the year, there are admittedly some question marks over whether and to what extent this momentum will continue in 2016. 

Positive and expansive market development continues apace – strong final quarter helps set a new record

“Positive company and employment market data are also the driving forces for the German office markets. In such an environment, decisions on a possible relocation or expansion are much easier to make and are also ultimately realised. In the last quarter of 2015 this once again caused a strong increase in take-up. In particular it was still possible to complete some large lettings,” emphasised Dr. Frank Pörschke, CEO JLL Germany.

The take-up volume stood at approx. 3.6 million sqm at the end of 2015 and was therefore 21% higher compared to the previous year as well as 7% above the previous record in 2011. Then, office space take-up reached approx. 3.4 million sqm. The volume also exceeded the five-year average by at least 19%. This is considerably more than was expected only a few weeks ago. The fourth quarter alone contributed approx. 30% to this result. “Whether take-up will be as spectacular in 2016 remains to be seen, but it is likely to fall slightly. Yet even a slight drop in demand should then be seen in the light of the fact that 2015 was a record year,” said Timo Tschammler, Member of the Management Board at JLL Germany. Tschammler added: “The willingness of companies to close deals was not only reflected in the take-up figures; net absorption as an indicator of expansion activities also showed a positive development. At the end of 2015, we registered the highest level of the past three years.” With an aggregate of 1.1 million sqm for the Big 7 cities (that is, the amount by which the occupied office space has increased), the five-year average has been exceeded by approx. 36%. Compared to the previous year the increase is around 220,000 sqm.
Numerous large contracts were completed in the last few weeks of 2015, resulting in a higher number of deals above 10,000 sqm compared to previous years. The number of such deals reached 38 by the end of the year and therefore exceeded the five-year average (2010-2014 with 33). These lettings generated a take-up volume of approx. 735,000 sqm in total, equating to a 40% increase compared to the average for the past five years. “Overall the markets are supported by a very broad base. Large deals alone are not a panacea for high take-up volumes; there is also a need for a generally dynamic market situation,” stressed Tschammler.
“The persistent concern of some market players that there is a growing disconnect between investment markets and lettings markets has proved to be unfounded. On the contrary, the generally positive development of the lettings markets throughout the year has ensured that the gap is narrowing,” said Tschammler. He added: “On top of that, take-up growth is not only concentrated on the top locations. In particular, companies from the telecommunications industry, the IT sector and industry are mainly focusing on secondary locations because of the lower rental prices - without accepting compromises on the quality of the space and fittings and fixtures - and thus are helping to drive growth across the country.”


Unbeatable demand in Berlin
When assessing the Big 7 in terms of their geographic location, take-up increased significantly year on year in Düsseldorf (+46 %) and Berlin (+43 %). The German capital not only achieved an all-time high of almost 880,000 sqm but for the first time also ousted Munich from its leading position. Munich and Cologne also registered double-digit growth rates. The other three property strongholds, Hamburg, Stuttgart and Frankfurt, ended the year with a slight increase in take-up.

Vacancies decline in all markets
Cumulated vacancies stood at 5.69 million sqm at the end of 2015, dropping below 6 million sqm for the first time since 2012 and 16% lower than the previous year’s level. The strong demand in the final quarter was also particularly noticeable here, because in the last three months alone vacancies dropped by almost 450,000 sqm (7%). The average vacancy rate across the Big 7 reached a new low of 6.4% by the end of the year. This is the lowest level since 2002, and is also 1.2 percentage points down on the previous year. “Since demand is also expected to remain at a high level in 2016 and speculative new construction work is again not signalling a supply glut, vacancies will fall slightly again in 2016. All the more so because the housing of refugees will remain an ongoing discussion in the current year and empty offices will also be intensively examined with regard to their suitability,” said Helge Scheunemann, Head of Research at JLL Germany. Scheunemann added: “In the Big 7 alone we have identified approx. 800,000 sqm that could potentially be used to house refugees, irrespective of the individual structural and legal situation. These are completely vacant properties with at least 5,000 sqm of available space. Theoretically, if full use is made of this space or if it is converted, the office vacancy rate could fall to well below 6%.”

Completions fell slightly in 2015
In the last quarter of the year around 307,000 sqm of new building space was completed, which was 25% less than had been expected only three months earlier. “This shows that there is still no significant new construction activity underway, particularly none of a speculative nature,” said Scheunemann. The completion volume amounted to a total of approx. 870,000 sqm in 2015 and was thus approx. 12% below the previous year’s level. In a 12-month comparison, the completions volume increased in all cities except Düsseldorf and Frankfurt, with most space coming onto the market in Hamburg and Munich. For 2016, a new building volume of almost 1.3 million sqm is expected. Of this, only 448,000 sqm is still available to companies seeking space. The majority  (65%) has already been let in advance or will be occupied by owners. “As long as the share of new building space still available on the market remains at around one third, we will still tend to have a shortage of supply, which in this respect should have no negative impact on the rental price development. This applies all the more because land prices are rising further due to competition over the usage of sites in desirable locations. Against this background, no increase in new building activity is currently foreseeable for 2017. On the contrary: the completions volume will again fall below 1 million sqm,” noted Scheunemann.
Prime and average rents continue to rise
Prime rents increased in all cities except for Cologne and Düsseldorf during the year. The aggregate prime rental price index was 3% higher in 2015 and in common with 2012 marked the strongest increase since 2007. Since rents also increased in secondary locations, the average rents also increased overall and outperformed the prime rents with a rise of 4%. In 2016, prime rents are expected to increase further by almost 1% and average rents by almost 2%.