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  • NAI apollo: Office lettings market in Frankfurt am Main with prospect of second-best result since 2000

NAI apollo: Office lettings market in Frankfurt am Main with prospect of second-best result since 2000

  • Highest space take-up in the past ten years
  • Increasing importance of office centres with a 20.5 % share of take-up
  • Take-up from deals above 10,000 sqm more than doubles
  • Vacancy rate falls below 10 % to reach 9.4 %
  • Average rent rises to €20.10/sqm and prime rent to €39.20/sqm
  • Outlook for 2017: Prospect of second-best result since 2000 with space take-up above 600,000 sqm

Frankfurt am Main, 04.10.2017 – In the third quarter of 2017, the Frankfurt market for office space lettings including Eschborn and Offenbach-Kaiserlei was able to continue the very positive development of the previous two quarters, according to the latest analysis by owner-managed real estate consultancy NAI apollo – partner of the NAI apollo group. The period from July to September 2017 represented the strongest third quarter of the past ten years, with space take-up by tenants and owner-occupiers of 183,900 sqm. This also represented a year-on-year increase of 45.1 % or 57,200 sqm. Space take-up for the first nine months of 2017 amounted to 432,200 sqm, which exceeded the previous year's level by around a quarter.

Second-strongest year after 2000

The Frankfurt office market is chasing new records, and for the full year will in all likelihood achieve the second-highest space take-up volume since 2000. Partly as a consequence of Brexit, large deals in particular will help generate above-average take-up for the fourth quarter of 2017," said Radomir Vasilijevic, Head of Office & Retail Letting at NAI apollo.

The two categories above 5,000 sqm have already registered especially strong growth in the first three quarters of the year. Take-up increased by 29.5 % year-on-year in the "5,001 – 10,000 sqm" cluster, while in the "10,000-sqm-plus" cluster the volume grew by as much as 124.4 %. The biggest deals in both the third quarter and the year to date include the owner-occupier purchase of the MainPark (29-35 Kaiserleistraße) with approximately 27,500 sqm of office space by Landesbank Hessen-Thüringen (Helaba) and the lease contract for 14,400 sqm at 277-293 Mainzer Landstraße by the City of Frankfurt am Main.

Banks, financial service providers and insurers remain the biggest users

The banking, financial services and insurance sector was again in first place in a ranking of the different office user groups, accounting for a volume of 102,100 sqm or a 23.6 % market share. The group comprising management consultancies, marketing and market research was next in line with 52,900 sqm or a 12.2 % share, followed by the construction and property industry with 45,100 sqm or 10.4 % of the market.

Due to the Helaba purchase, the superordinate location "office centres" gained further in significance and accounted for 20.5 % of take-up or 88,400 sqm in total. However, the Central Business District remained the most popular location with 236,400 sqm or a 54.7 % market share," explained Dr Konrad Kanzler, Head of Research at NAI apollo group.

Large lettings in high-priced project developments such as "Omniturm" or "Four" influenced rental prices in the third quarter of 2017. Compared to the previous quarter, the average rent increased by €0.60/sqm to €20.10/sqm. The prime rent grew by €0.20/sqm to the current level of €39.20/sqm.

Vacancies continue to decline

No office properties of any significance were completed in the third quarter of 2017, while in contrast around 18,000 sqm was removed from the market and converted into residential space. As a result, office stock declined to 11.37 million sqm at the end of Q3 2017.

In the year as a whole, the projected completions volume currently stands at 98,700 sqm, of which only 7,400 sqm is still available on the rental market," said Dr Konrad Kanzler.

Vacancies fell further in the period from July to September, continuing an ongoing trend. Market-active vacancies on the Frankfurt office market – that is, office space that can be occupied within three months of the contract signing – decreased by a further 74,000 sqm to 1.07 million sqm within the quarter. This translates into a vacancy rate of 9.4 %, which fell 0.6 % during the previous three months.

The lettings pipeline is still well-filled and will have a significant impact on the fourth quarter of 2017, which is why we are able to forecast space take-up of significantly above 600,000 sqm for the full year," said Radomir Vasilijevic. As a consequence, vacancies will continue to decline and rents will continue to rise.

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