With solid quarterly results, the Frankfurt office space market heads toward the end of the year

9 Oct, 2012, Frankfurt

• 342,000 sqm of office space leased by the end of September
• Top lease rates stable
• Vacancies continue light fall

Rental volumes on the Frankfurt office space market (including Eschborn and Kaiserlei) reached approximately 342,000 sqm in the first three quarters of 2012. In so doing, the market has bettered its figure for the previous year (335,000 sqm) and its long-term average; ultimately, an average volume of 332,000 sqm has been recorded by the end of September for the last ten years. Following a restrained second quarter, rental activity in the Main metropolis was revived in late summer 2012: in contrast to a floor space turnover of 94,000 sqm for the second quarter, the previous three months saw a solid total of 118,000 sqm.

According to the international commercial real estate consultancy Cushman & Wakefield (C&W), the market is particularly buoyant in the smaller and medium-sized floor space segments. "The trend of fewer large contracts and, instead, more movement in the small space segment is continuing this year. Up until now, we have recorded six rental contracts north of the 10,000 sqm mark totalling 86,200 sqm," reports Dennis Stern, Head of C&W's Frankfurt office space leasing department. "In comparison with previous years, these are especially good results, both in terms of the number of deals and total floor space volumes. Appearing particularly active, however, are the market actors in the floor space category between 1,000 and 3,000 sqm. It is here that 61 leases covering a total of 97,300 sqm were penned by the end of September. The previous year's result has thus already been now bettered by 6% and the market share of this segment now stands at a proud 28%." The small-scale lease segment appears to be very stable yet again. Rentals for spaces under 1,000 sqm contributed 34% to floor space turnover by the end of September (116,500 sqm).

Vacancy rates have fallen for the sixth quarter in a row. The rate stood at 13.5 % at the end of June and now stands at 13.3 %. The volume of unoccupied space currently stands at 1.6 million sqm. Since new premises which are set to become available on the Frankfurt market in the coming months have high occupancy rates, a further fall in the volume of vacancies is forecast, particularly in the sector for high-quality office space.

The volume of building completions is also below average in the third quarter of 2012. 29,000 sqm of new office space has landed on the Frankfurt market over the past three months, meaning the volume of building completions from the beginning of the year to the end of September stands at just 66,700 sqm. By the end of the year, this figure may rise to 96,600 sqm. The year 2012 is therefore the third lowest for building completion volumes over the past decade – only in the years 2008 (57,900 sqm) and 2007 (71,000 sqm) did less new office space hit the market. Only in the coming year will the level of building completions rise considerably once more. Up until now, 348,100 sqm of office space is under construction due for completion in 2013 (including the ECB headquarters).

Top lease prices have been recorded at EUR 34.00 per sqm/month for the fourth successive quarter. Generally speaking, lease price trends in the Frankfurt market area have been characterised by great stability over the past nine months. The range of incentive packages offered by landlords experiences just as little volatility as rental prices in peripheral locations.

"The Frankfurt office space market looks to be in very good shape in early autumn," suggests Inga Schwarz, head of the research department at C&W Deutschland. "Market actors are continuing their activity in spite of the ongoing Euro and sovereign debt crises, as well as the gloomy prospects for the economy. Floor space turnover may turn out just as stable in the fourth quarter as it has been in the past three months. This will mean a result for the whole year topping that of the figure for the previous year."

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