Colliers: Subdued start to the year – office market between uncertainty and focus on quality

"The start of the year shows that the office leasing market continues to operate in a challenging environment. It is not so much the number of deals as their size structure that is important. While large-scale leases remain stable, there is a pronounced restraint, especially in the mid-range space segment," said Cem Ergüney, Head of Office Letting Germany at Colliers, commenting on the quarter.

Three of the seven top 7 locations were able to increase their take-up compared to the same quarter of the previous year: Berlin (+28 per cent), Munich (+17 per cent) and Düsseldorf (+12 per cent). In the other markets, letting activity declined, particularly clearly in Frankfurt (-66 percent). Although this development was to be expected due to the special situation in the prior-year quarter with several exceptionally large-volume leases, it was stronger than expected. Cologne also recorded a noticeable minus of 28 percent, which is due in particular to the lack of suitable space for major users.

With a share of around 20 per cent and take-up of around 120,000 square metres, the IT sector was the strongest user group in the first quarter of 2026. This was driven by several large-volume deals, including the largest of the quarter by JetBrains in Munich. In total, three of the ten largest deals were accounted for by IT companies in Munich, Berlin and Hamburg. The manufacturing sector achieved a share of around 16 percent, driven by several major deals in Munich and another in Berlin. The public sector was still cautious at the beginning of the year, but is likely to act more strongly as a buyer again in the further course of the year on the basis of the current application profiles.

In Ergüney's opinion, the IT industry continues to confirm itself as a structurally robust segment of the office leasing market despite a challenging environment. "This is also in line with our current industry sentiment analysis. At the same time, however, this analysis also shows that sentiment in many other sectors has recently deteriorated further – especially among medium-sized companies," says Ergüney. This reluctance is also reflected in the current weak demand in the mid-range segment. Additional geopolitical uncertainties are likely to further intensify this development and have a dampening effect on rental dynamics.

With 20 deals over 5,000 square metres, the number of major leases was slightly higher than in the previous year and exactly at the level of the five-year average. However, the resulting volume of space fell lower because, unlike in the same quarter of the previous year, no lettings in excess of 30,000 square metres were registered. The three largest deals of the quarter were just over 20,000 square meters each, two of them in Munich and one in Frankfurt.

The segment from 2,000 to 5,000 square metres developed much weaker. With only 24 degrees, the lowest value since 2010 was reached. Compared to the previous year (41 deals) and the five-year average (48 deals), this corresponds to a significant decline across all top 7 locations. "This segment, which traditionally shapes the market, is currently under particular pressure," explains Ergüney. "On the one hand, companies of this size often react at short notice to current economic and geopolitical developments and postpone their leasing decisions accordingly. On the other hand, the supply environment exacerbates the situation: the ongoing flight-to-quality means that high-quality project developments are often completely absorbed by major users. As a result, there are fewer and fewer suitable and economically feasible areas available for medium-sized users."

The vacancy rate for office space has risen continuously since its low point in 2019 and currently stands at around 8.7 million square metres, which corresponds to a rate of 8.9 per cent. This means that the vacancy volume is at a similar level to 2010. The share of sublet space currently amounts to around 650,000 square metres, or seven per cent of the total vacancy rate. This is around 70,000 square metres below the previous year's level – a decline that is largely due to successful subletting in Berlin over the past twelve months.

"In the further course of the year, a further moderate increase in vacancy rates is to be expected across all locations. This is attributable both to subdued demand and to space savings in the course of consolidation and efficiency increases in leasing. At the same time, there are clear regional differences. While larger new developments are coming onto the market, especially in Berlin and Munich, supply in the other top 7 markets remains much more limited," explains Francesca Boucard, Head of Market Intelligence & Foresight at Colliers. According to their forecast, vacancy growth is likely to slow down sharply overall from 2027 onwards, as the project pipeline is declining significantly and consequently lettings in good existing properties will become more important.

Prime rents rose in the first quarter of 2026 compared to the same quarter of the previous year in five of the seven top 7 markets and were in some cases significantly above the inflation rate. The driver of this remains the continuing high demand for modern, high-quality office space in central locations. Munich is particularly noteworthy with an increase of 14 percent, which exceeded the mark of 60 euros per square meter for the first time. This underlines the high price pressure in the premium segment.

Apart from the premium segment, rents are moving sideways in many places, which – depending on the respective deal mix – also influences average rents. Accordingly, these developed inconsistently in the top 7 markets. In Stuttgart, the average rent fell by 14 percent, mainly due to a lower share of high-priced contracts in the past twelve months. In previous years, larger public sector leases in high-priced new and existing space in particular had caused average rents to rise above average – not least because of their exemplary function in the area of sustainability. The decline in these trades is now having a correspondingly dampening effect. In the other top 7 markets, average rents remained largely stable, with some moderate swings up or down. The strongest year-on-year increase was recorded in Düsseldorf with an increase of 8 percent, driven by several medium-sized deals above 25 euros per square meter.

The economic conditions remain tense. Additional geopolitical uncertainties have recently led to a further reduction in GDP forecasts. The medium-term development of the office letting market will therefore continue to depend to a large extent on geopolitical developments.

"For 2026 as a whole, we currently expect take-up to be at the previous year's level of around 2.6 million square metres," Ergüney concluded. "The market remains characterised by a targeted selection of space and a clear focus on the quality, location and future viability of the properties. The decisive factor will be how quickly companies regain sufficient planning security and find their way back into active leasing processes."