Market dynamics in the top 5 office markets remain diversified: Berlin and Munich provide impetus in a market environment that remains selective

The sales development remains diverse depending on the location. Berlin and Munich in particular were able to achieve significant growth, thus providing important impetus for the overall market activity.

In Berlin, take-up in the second quarter exceeded the 200,000 square metre mark for the first time since 2022, mainly due to several major deals, in particular two owner-occupiers. At 385,500 square metres, half-year take-up was significantly 46 per cent higher than the previous year's figure. The influence of the tech sector, which is also inspired by AI, on the demand for space can also be clearly registered in Berlin at the moment.

Munich further expanded its status as an important tech metropolis and innovation location. Supported by the strongest second quarter in almost four years, the market achieved its highest half-year take-up since 2022 of 335,600 square metres. The market was characterised by large-scale lettings and owner-occupiers from the flourishing tech and robotics sectors, with correspondingly high space requirements for the local and newly established companies. The consulting industry also attracted attention with numerous leases, preferably in Munich's top locations.

Take-up in Düsseldorf, Frankfurt and Hamburg was much more subdued. In Düsseldorf, half-year take-up of around 99,000 square metres was slightly below the previous year's figure. In Frankfurt, there was a decline of 57 percent to 148,800 square meters, while take-up in Hamburg fell by around a third. The willingness to rent was noticeably subdued at this location, although larger deals were concluded in isolated cases and high-quality properties in premium locations remain in high demand on the part of users.

The supply side remains characterised by a further moderate increase in vacancy rates. At the end of the second quarter, the vacancy rate in the top 5 markets increased to around 8.5 percent. At the same time, prime rents continue to rise due to the high demand for top space in CBD locations that is highly limited in supply.

In Berlin, the prime rent rose to 46.50 euros per square metre per month in the second quarter, partly due to high-priced deals in premium locations, and the average rent rose again for the first time in some time. Although the vacancy rate marked a further year-on-year increase to 8.4 percent, the increase slowed noticeably in the second quarter.

In Düsseldorf, a moderate increase in prime rents to 46.00 euros per square metre per month was registered. The vacancy rate increased only slightly to 12.6 percent.

The prime rent in Frankfurt rose moderately to 55.00 euros per square metre per month, albeit with a significant drop in average rent. Companies pay more attention to costs, which means that premium space in the CBD is only in demand if they are willing to pay. Price-conscious users are increasingly orienting themselves towards decentralized alternatives. The vacancy rate marked a moderate increase to 11.2 percent.

The most significant increase in prime rents was recorded in Hamburg, up 13.9 percent to 41.00 euros per square metre per month. At 4.6 percent, the vacancy rate remains the lowest of the top 5 locations.

In Munich, the unabated strong demand for top space within the Mittlerer Ring led to an increase in prime rents to a new high of 62.00 euros per square metre per month. The vacancy rate increased only slightly to currently 8.1 percent.

"For the rest of the year, we expect demand to gradually stabilize slightly despite the challenging market environment," says Ape. Individual large-volume deals and increasing demand from technology-driven industries are likely to have a positive impact on market activity in the coming months. "Nevertheless, the office leasing market remains characterized by challenges."

Nevertheless, the expansion of supply in the top 5 markets will remain manageable by the end of 2028 in view of a current speculative project development pipeline under construction of a total of 1.9 million square meters. However, this also means that high-quality areas within central locations remain scarce.

The discussion about the conversion of vacant office buildings will become more intense in all cities over the course of the year. With a total of 300 million euros, the federal government wants to promote conversion to other uses, especially housing, and create a greater incentive for investors. Cities have also recently shown themselves to be more open to changes of use. "However, it remains to be seen whether the political will is sufficient to actually enable changes of use on a larger scale. Unfortunately, the designated subsidy is a necessary incentive, as the conversion is otherwise not financially attractive enough, even if office space is no longer needed," explains Linsin.