After the first half of the year, take-up on the Frankfurt office market amounted to around 173,000 m², of which 150,000 m² was in the gif market area. This is the result of the analysis by BNP Paribas Real Estate.
This means that the result is well below the very strong level of the previous year (-53%) and also falls short of the long-term average (-27%). “This is due in particular to the gloomy economic environment, ongoing geopolitical uncertainties and structural changes on the demand side. The current noticeable reluctance of many companies is having a dampening effect on market activity,” explains Riza Demirci, Managing Director and Frankfurt Branch Manager of BNP Paribas Real Estate GmbH.
The office market continues to be characterized by subdued demand. Larger land applications in particular are being implemented only hesitantly against the backdrop of hybrid working models, extended decision-making processes and increased planning uncertainty. However, the comparatively low take-up only reflects actual market activity to a limited extent, as the letting pipeline remains well filled. In the second quarter, three major deals were signed in the 5,000 m² range, including two in the city center and one deal by Fraport at the airport.
Rents are stable overall, with a positive trend in the prime segment: over a twelve-month period, the average rent across all deals rose by around 2% to €28.30/m². The prime rent for high-quality space in prime locations increased more significantly by 6% and currently stands at €57.00/m². In some cases, contracts even exceed this high level, which is also high nationwide, with contracts of over €70/m² already being registered in the current year.
Consultancies and financial services with a share of 44% – vacancy rate down slightly since the beginning of the year
In the distribution of take-up by sector, consulting firms clearly dominate the ranking with a share of 24% and are thus well above their long-term average (Ø 10 years: 18%). Banks and financial service providers achieve a high market share of 20%, which is typical for the industry.
A currently more fragmented market structure is also striking. At 19%, large-scale deals of more than 5,000 m² contribute significantly less to take-up than the long-term average (32%). In contrast, small and medium-sized spaces between 200 and 5,000 m² dominate the market with a cumulative share of 78%.
The vacancy on offer has been characterised by a slight decline in the vacancy rate since the beginning of the year, which currently amounts to around 1.8 million m². Of these, 56% have modern equipment quality. The total amount of space under construction has remained largely stable over the past twelve months and amounts to around 406,000 m². Of this, about 176,000 m² are currently still available. The pre-letting rate is 57%. Overall, the market thus has a comparatively solid supply of space still available under construction, but there is almost no supply of project developments still available in absolute premium locations.
Prospects
In the further course of the year, the Frankfurt office market is expected to continue to develop calmly, but at the same time increasingly stable. Despite ongoing economic uncertainties and geopolitical risks, it is clear that some companies are willing to concretise their space strategies and gradually implement postponed decisions. In the context of hybrid working models, existing space requirements are being redefined and successively translated into concrete deals.
“The demand for space is supported by the continued high attractiveness of Frankfurt as a location. In particular, consulting-related and financial sectors continue to ensure solid demand, so that a revival of market activity is expected in the second half of the year. Against this backdrop, a moderate increase in take-up can be expected, so that a level of around 420,000 m² by the end of the year seems realistic,” says Riza Demirci.
The supply side also offers good conditions for a moderate market recovery: a solid volume of modern space meets stable demand for high-quality properties in central and well-connected locations. Against this background, the rental price trend is likely to continue to be positive, with the prime rent expected to exceed the €60/m² mark for the first time in the short term.
