Frankfurt office market with solid rental performance at the half-year point

5 Jul, 2012, Frankfurt

• Rental performance in the Frankfurt office space market at the long-term average in the first half of 2012
• 224,000 sq. m rented by the end of June
• High-end lease prices stable
• Vacancy rates fall

Roughly 224,000 sq. m were rented in the Frankfurt office space market (including Eschborn and Kaiserlei) in the first six months of this year. This means the half-year result is the same as the average for the past five years (the average being 226,000 sq. m) and 9% above the average for the last ten years (that average being 207,300 sq. m). Such strong results for the start of the year – with 130,000 sq. m rented out by the end of March – haven't been achieved for the last three years. In the second quarter, a total of 94,000 sq. m were rented.

According to the international commercial real estate consultancy Cushman & Wakefield (C&W), banks and financial services were particularly lease-strong up until the end of June. "In the first half of 2012, this sector contributed around 27% of rental turnover with nearly 60,000 sq. m and has now nearly reached its total annual result for 2011 already (65,000 sq. m)", reckons Dennis Stern, Head of C&W's Frankfurt Office Space Leasing department. "Significant contributions to this really good result came from three leases all north of the 10,000 sq. m mark: 13,600 sq. m from SEB Hypothekenbank AG; 13,000 sq. m from Kreditanstalt für Wiederaufbau; and 12,700 sq. m from Union Asset Management Holding AG. But even in the small to medium-sized segment, banks and financial service providers signed numerous deals. This is a positive sign for the financial centre of Frankfurt."

On the whole, the Frankfurt market looks broadly diversified at the half-year stage. As with this period in the previous year, a good 30% of rental turnover was for leases with an area larger than 5,000 sq. m and a further 35% was for deals on rental space between 1,000 and 5,000 sq. m. Even the smaller rentals under 1,000 sq. m make up some 35% of the current result.

The number of vacancies is continuing to fall in the Frankfurt market. For the fifth quarter in succession, the vacancy rate has fallen – it now stands at 13.5% (the first quarter was 13.7 %). From a total stock of office space of 12.01 million sq. m, 1.62 million sq. m are available for short-term leasing.

The quantity of building completions was below average in the first half of 2012. Until now, only 37,700 sq. m have been completed, the majority of which were pre-leased already. 56,700 sq. m of newly completed office space is expected during the second half-year, and all of this space has already been leased prior to completion.
A total completion volume of 333,000 sq. m has been pencilled in for the coming year – and as of June 2012, 67% of this has been pre-leased. Amongst the larger new office spaces are the central administration of the European Central Bank (ECB) with 90,000 sq. m and Poseidon Haus with 40,000 sq. m, which is currently being renovated.

At the half-year point, the high-end lease price continues to be stable at 34.00 Euros/sq. m/month. The trend in lease prices is the result of great consistency in early summer: the scope of incentive packages offered and the level of rent in the periphery locations are currently less volatile.

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