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The Frankfurt office space market: Things finally looking up as the year gets off to a good start
19 Apr, 2007, Frankfurt
Frankfurt’s office space market got off to a good start to the year in the first quarter of 2007. With 72,000m² of leased space, the 2007 volume is above the 5-year first quarter average of 68,200m². An increase of 34.6 % was even registered compared to the poor volume (53,500m²) in the same quarter in 2006. A clear sign that the market is again gaining in activity.
According to Cushman & Wakefield (C&W), the international commercial real estate organisation, contracts for between 5,000 and 10,000m² have in particular contributed to lease volumes. These contracts make up around 39 % of the total volume (25,000m²). A further 33 % of the total volume is accounted for by the main category of contracts for lease areas between 1,000 and 3,000m². According to Robert Menke, Director of C&W’s office space leasing department in Germany, "No deals have been made in the first quarter for space of over 10,000m²."
The development in vacant space is also a positive factor. In the first quarter, no new office space came onto the market, while, at the same time, net absorption was registered. For the third successive quarter, this constellation led to a decline in vacant space. The vacancy rate is currently at 15.9 %, which means that around 1.84 million m² are available at short notice. "This is, however, still a very large figure," says Menke, "but don’t forget that only 33 % of all space belongs to quality category A, the quality category that is in high demand." Only 46 % of these premium spaces are available in the prime locations of the banking quarter, City and Frankfurt’s West End. "On the market, we are now seeing that developers have recognised the shortage of space in the top segment forecast by us just under a year ago. They are snapping up non-marketable space for redevelopments or conversions from the market and are also embarking on new projects again. The mood is good. We can go forth in the year with optimism."
Over the previous quarter, high-end lease prices remained stable at 34 per square metre per month, but, in view of the space shortage in the top segment, these prices continue to be under pressure. Lease price development in Frankfurt’s peripheral locations is also stable.
In view of the positive overall economic development and the positive trend in the market indicators over the past few months, the Frankfurt real estate sector appears to have finally bottomed out and is starting to climb out of its recession. All signs point clearly to a rise, and no longer to a decline.
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