VICTOR Prime Office

Q2 2023

Valuation Performance Indicator

Indicator level: 185.8
Change from previous quarter: -4.8 %

August 08, 2023

Market comment Q2 2023

The decline in the performance of the Victor Prime Office Indicator slowed slightly again in the second quarter of 2023: a current decline of 4.8% compared to -5.7% in the first quarter of 2023 and -8.2% in the fourth quarter of 2022. The new indicator reading is 185.8 points. The decisive factors for the negative growth were again yield increases of 30 basis points in Dusseldorf and 25 basis points in the other four locations.

The transaction market is almost at a standstill, and large transactions in particular are hardly taking place. In addition, the office letting market, which has been stable for a long time, has cooled down. The letting volume in the Big 5 locations is around a third lower in the first half of 2023 compared to the corresponding period of the previous year. Demand is increasingly focused on high-quality space, so that in the premium locations of the top 5 real estate strongholds considered in Victor, brisk letting activity is still underway and, to varying degrees, impulses from the rental market have been able to counteract the rise in yields.

*Total Return: observed annual performance of the indicator plus the expected returns on the cash flow (net-initial yield of the previous year)

In terms of quarterly performance, the decline in the second quarter of 2023 is the smallest in the Dusseldorf banking location - the tail end of the previous quarter - at -3.9%. The new indicator stands at 166.8 points. In the city on the Rhine, a comparatively strong increase in market rents and a lower vacancy rate mitigated the effect of the rise in yields more than in the other locations considered. Thanks to positive rental effects, Frankfurt's banking location is also in second place with -4.6% and a new indicator score of 170.6 points. Munich's prime location follows only closely behind with -4.7% to 198.4 points. In particular, a significant increase in prime rents contributed to this. Stagnating rents in Hamburg's city centre resulted in a quarterly performance of -5.4% to the new indicator level of 201.5 points. Berlin came last with -5.6% and 202.3 points.

The continuing decline in quarterly performance brings the annual performance calculated for all locations even further into negative territory. At -19.4 %, the annual minus reaches a new negative record. The ranking of the cities is similar to the previous quarter. Once again, Munich achieved the least negative result with -17.2%. Thanks to the comparatively good quarterly development, Dusseldorf's banking location follows with -17.4 %. Hamburg's city centre is in the middle of the league with -19.6% and the last place is shared by Berlin's prime locations and Frankfurt's banking location (both -21.1%).

After five quarters of negative growth, the Victor Indicator is now at a similar level to the second quarter of 2018, with significant differences between the cities. While Berlin, Dusseldorf and Hamburg are on average, value losses are highest in Frankfurt. There, the indicator has fallen to the level of the second quarter of 2017. Munich is doing the best, with the indicator falling to the level of mid-2019.

The situation on the real estate market remains tense with a continuing price discovery process and low transaction volume. For a long time, real estate investments in Germany were considered to be without alternative and a safe haven, but they are now facing competition again: In the current stagnating economic environment, foreign investors are holding back in Germany and turning to more attractive investment destinations. In addition, the rise in interest rates has brought alternative forms of investment such as bonds and shares back into focus. On the seller side, the acceptance that the "old" price level is no longer attainable seems to be increasing, but the pressure to sell is apparently not yet high enough. At the moment, a significant increase in transaction activity is not foreseeable; rather, decisions are being postponed in the hope of a stabilisation of the interest rate and financing environment. Further increases in yields are likely until the end of the year, although the extent could be reduced somewhat.

VICTOR – Valuation performance indicator

Property markets exhibit cyclical fluctuations from which even the prime German prime office locations are not immune. The volatility of price performance emphasizes all the more how important a transparent market indicator is. In this context, JLL analyses the price development in the prime office locations of the cities of Berlin, Dusseldorf, Frankfurt, Hamburg and Munich. Holders of real estate port-folios and potential investors should be given the oppor-tunity to obtain greater transparency for clearly defined submarkets and identify developments and trends more quickly so they can act accordingly. The indicator analyses the following submarkets, which have a total area of approximately 12 million sqm:

  • Berlin – Charlottenburg / Mitte / Potsdamer Platz und Leipziger Platz

  • Dusseldorf – Banking district

  • Frankfurt – Banking district

  • Hamburg – City centre

  • Munich – City centre

In these submarkets, the price development of the lettable office space stock is analysed. The analysis identifies the changes in value of the office space stock and reflects the performance (capital growth) over time. In the overall analysis (VICTOR Top-5), the price development of the abovementioned prime office markets was averaged (unweighted). As a result of the differing amount of existing office space and the differing value levels in the individual submarkets, these values were considered with a 20% weighting in the Top-5 Indicator.

Since 31 December 2003, the indicator has been calculated on a quarterly basis and will continue to be updated on a quarterly basis in the future. The short observation intervals provide an adequate picture of short-term market fluctuations and a realistic portrayal of current market trends. In this regard, the Valuation Performance Indicator VICTOR is a valuable benchmarking tool and a trend barometer for the analysed submarkets.


The market valuation of the submarkets, based on the effective date, is carried out according to international valuation standards and is based on the JLL database. The assumptions in the model relate to real market data as well as the assessment of JLL professionals. In the model, we refer to an assumed fixed space inventory in the submarkets, actual vacancy rates as of the effective date and different quality proportions. This ensures a real-istic picture of the letting situation and temporal compara-bility of the indicator values. The calculation is based on a discounted cash flow model, which takes into account all valuation parameters relevant to market standard.

Inflation expectations, as well as the market rental growth anticipated by JLL, are explicitly considered in the analysis. The growth of the contractual rents was adjusted on the basis of market standard, assumed indexation regulation and the real inflation rate. The market rents of the prime office locations are analysed by JLL on a quarterly basis and incorporated into the model. The contractual rents are determined over a historic time series, so that a statement about the respective over / underrent status can be made. In addition, explicit ongoing building costs, letting costs and rental incentives as well as esti-mated void and reletting periods are considered in the cash flow.


Dr. Andreas Dickert, Team Leader Operations Management

Ines Lippolt, Director Operations Management

Contact us

Our contacts:

Ralf Kemper, Head of Value and Risk Advisory Germany

Helge Scheunemann, Head of Research Germany

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