NAI apollo: Office lettings market in Frankfurt am Main takes a breather
Frankfurt am Main, 1 October 2019 – The market for office space in Frankfurt, including Eschborn and Offenbach-Kaiserlei, took a small breather in the third quarter of 2019 following a strong first half of the year. This is the conclusion of the owner-operated real estate consultancy company NAI apollo. Space take-up by tenants and owner-occupiers amounted to 101,400 sqm during this period. “Expected deals such as the City of Frankfurt’s lease of more than 25,000 sqm of office space in the City West have not yet been finalised. Accordingly, the result for this quarter is around 14 % below the ten-year average for third quarters,” comments Andreas Wende, Managing Partner of NAI apollo, on the result.
The accumulated take-up for the first nine months of 2019 is 364,100 sqm. Although this figure falls more than 17 % short of the previous year’s value of 440,900 sqm, it is still almost 5 % above the long-term average of around 347,000 sqm. Lease renewals after active market screening enjoyed significant growth to 113,100 sqm, the highest volume since 2014.
Major deals continue to dominate market activity
The large-scale deals of the second quarter still dominate the market situation in the year to date. As such, only the 10,000 sqm-plus size category recorded an increase in take-up of around a fifth compared to the previous year. The other segments, on the other hand, are characterised by falling take-ups.
“Alongside the large-scale deals that have already been completed, such as those of DekaBank Deutsche Girozentrale in the Lyoner Quartier for more than 46,200 sqm and Randstad with around 14,800 sqm in Eschborn, Check24’s rental of almost 7,500 sqm at Speicherstraße 55 in the third quarter is among the largest transactions in the first nine months of 2019,” explains Wende. WeWork’s lease of over 4,750 sqm at Schillerstraße 19-25 also falls under the third quarter.
In a comparison of the sectors, “banks, financial services and insurance companies” continue to dominate with a market share of 27.8 %, which corresponds to a take-up volume of 101,200 sqm. The “management consultancy, marketing & market research” and “construction and real estate” industries are a considerable distance behind with a market share of 14.5 % and 11.6 % respectively. “The relatively large share accounted for by the construction and real estate sector continues to be driven by co-workers, who leased more than 27,000 sqm in the 1,000 sqm-plus segment alone in the first three quarters of the year,” comments Dr Konrad Kanzler, Head of Research at the NAI apollo group.
Prime rent reaches third-highest value
“Due to the Deka deal from the second quarter, the Lyoner Quartier is still the location with the highest take-up volume with a figure of 66,300 sqm. Eschborn follows with 42,100 sqm, ahead of the banking district, Westend and the city centre, which all recorded similar leasing figures in the region of 29,400 sqm and 33,700 sqm,” comments Kanzler on the distribution of take-up.
“Leases in recently completed office projects in the banking district have a positive effect on the prime rent during the third quarter of 2019. This has increased by € 1 per sqm to € 45 per sqm over the last three months. Growth compared to the previous year is 8.4 %. With this, prime rent in the Frankfurt office market has achieved its third-highest level after 2001 and 2000,” says Kanzler, summing up the rent development. Average rent is currently € 22 per sqm; although this has most recently remained stable, it has increased by 2.3 % over the last 12 months.
Brief stabilisation of space availability
Seven office projects offering a total of 146,200 sqm of space were completed in Frankfurt during the third quarter of 2019. The most prominent completions are the Omniturm with over 45,600 sqm and the Marienturm with more than 41,000 sqm. A total of 29,100 sqm were removed from the market and mainly consisted of smaller properties. Accordingly, the Frankfurt office market enjoyed slight growth in net floor space, with a current office stock of around 11.45 million sqm.
The completion of a further 22,900 sqm of office space is expected by the end of 2019. According to the current status of development, 254,100 sqm will enter the market during 2020, more than 60 % of which is already leased.
Available office space in the recently completed projects have resulted in a slight increase in the vacancy rate during the third quarter. Therefore, the total amount of empty space available on the Frankfurt office letting market, meaning office space that can be occupied within three months of signing the lease, is 720,000 sqm as at the end of September 2019. “This figure has thus increased by 11,000 sqm compared to the previous quarter. Compared to the same period of the previous year, however, it represents a fall of 106,000 sqm. The corresponding vacancy rate is 6.3 %, which is 1.0 % below that of the previous year,” adds Wende.
NAI apollo believes that a number of clients who are still looking for large amounts of space will have an effect on the market figures in the final quarter. Consequently, the vacancy rate will fall again and high-price deals will lead to a further increase in rent prices.