Berlin office space market has strong second quarter after solid start to the year

4 Jul, 2012, Frankfurt

• Yet another record for half-year turnover with 330,000 sqm
• Vacancies remain on the slide

In the first six months of the year 2012 some 330,000 sqm was rented out for the first time in the Berlin office space market. This means the very strong result from the same period the previous year (314,000 sqm) has been surpassed and, for the second summer in succession, a record half-year result has been posted. Following a good start to the year with 137,000 sqm leased in the first quarter, rental activity ploughed onwards in the second quarter with another 193,000 sqm leased in the spring months. The current half-year result is 50% above the average for the last ten years (that average being 128,300 sqm).

According to the international real estate consultants Cushman & Wakefield (C&W), it was above all the buoyant rental activity in the large area category – 1,000–3,000 sqm – that contributed to the growth in turnover. Up to this point, 49 contracts were penned relating to a total of 78,200 sqm in this category – that's a 68% increase in revenue on the previous period last year. The sales volume for the size category under 1,000 sqm also increased from 121,400 sqm in the first half-year of 2011 to the 152,000 sqm just posted – growth of 25%. “There continues to be a lot of dynamism in the small rental segment”, says Lisa Ebert from C&W's Berlin office rental department. “Don't forget that is the area category which contains one of the most important rental groups, namely creative firms and start-ups. Their confidence in the location is unwavering. The capital's attraction stretches way beyond the city's boundaries even in 2012. Over the past few months, we haven't only been registering newly founded companies from Berlin, there have also been many companies moving here from around Germany and abroad. And that's not only the case in the small area segment”.

The public sector was yet again one of the strongest rental sectors in the first half-year, which contributed some 34,000 sqm to the turnover volume (10.6% of market share) with deals for large rental spaces for the German Ministry of Defence (16,700 sqm) and the job agency Mitte (12,000 sqm) as well as some smaller rental deals in the previous half-year. A lot of action can still be noticed from education and welfare institutions, whose market share stands at 11%. Market development in the IT sector is also dynamic with 27,500 sqm of office space having been newly rented out by companies from this industry up until now (8.3% market share).

For the fifth quarter in succession, the vacancy rate in Germany's capital city has fallen. The rate stood at 7.7% at the end of March and 7.4% at the end of June. In summer 2012 the total stock of office space in Berlin amounts to 17.48 million sqm, of which 1.29 million sqm are available for short-term lease. “We are expecting a continuation of this trend in the second half-year. The vacancy rate could fall even further”, suggests Ebert. “The bulk of the space that is to be constructed and finished in 2012 is already pre-leased. It would appear that in the coming six months the number of projects launched speculatively will increase only slightly. If the market stays so active in the coming months – which we are expecting to be the case – and net absorption is positive, then the volume of available space will very clearly fall, too”.
In the first half-year a total of 33,300 sqm of office space was completed. Approximately 353,000 sqm is under construction.

The premium rental rate in summer 2012 remains €21.50 per square metre. Whilst rental prices in the top segment currently appear stable, rental price levels for well-furnished properties in the inner-city B-zones are tending upwards. This applies in particular to the sub-markets City East and City West, whose respective market shares stood at 34 and 32% for the first half-year.

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