Office leasing market shows pronounced polarization

"The subdued economic development is prolonging the decision-making processes in many companies. Nevertheless, we do not see a fundamental blockade here," says Cem Ergüney, Head of Office Letting Germany at Colliers, classifying the situation. "Rather, we see a selective movement.   Major users continue to make strategic space decisions if the location, property quality and macroeconomic prospects are convincing. The fact that there have been no leases of more than 10,000 square metres in markets such as Frankfurt is depressing take-up in the short term, but it does not change the fundamental demand for transformation."

With 36 deals over 5,000 square metres, the number of large-volume lettings in the first half of the year was only slightly below the previous year's figure of 40 and thus around 10 per cent lower. However, the volume of space thus achieved was 21 per cent lower – an indication that there was a lack of particularly large-scale individual deals in the market.

A significant proportion of the largest deals are concentrated in Berlin and Munich. Both markets account for seven of the ten largest lettings in the first half of the year. These included the two largest individual deals as owner-occupier projects: a project development by BImA in Berlin with around 31,500 square metres and the start of construction by Apple in Munich with almost 30,000 square metres.

In the other markets, on the other hand, there is less momentum. Frankfurt in particular stands out: After 12 deals over 5,000 square metres in the first half of 2025, only three were registered in the first six months of this year. This decline was a key driver of the decline in take-up.

Flight-to-quality continues to shape the office leasing market, but no longer to the same extent in all markets. A look at the past 18 months shows clear differences: in Berlin, Frankfurt and Munich, more than 40 percent of take-up was accounted for by project developments, new buildings or extensively renovated properties. This is followed by Düsseldorf and Hamburg with around 25 percent each, while Stuttgart (17 percent) and Cologne (15 percent) have significantly lower shares.

"We are increasingly observing that the demand for high-quality office space is no longer equally distributed across all top 7 markets. While the focus on quality remains unbroken in some locations, the availability of suitable space is becoming more important in others. As a result, the top 7 markets are diverging more strongly again," explains Ergüney. "This increasing differentiation is also reflected in the development of rents. As a result, the spread between the markets is increasing again."

Prime rents rose again in several markets in the first half of the year and reached new highs. Munich leads the ranking with 62.00 euros per square metre, followed by Frankfurt at 56.00 euros per square metre.   In Berlin, the 50 euro per square metre mark was exceeded for the first time at 50.90 euros per square metre. The difference between the highest and lowest prime rents is currently around 88 percent.

"As recently as mid-2023, the spread between the markets was around 35 percent. At that time, prime rents had converged significantly in the course of a largely nationwide flight-to-quality," explains Francesca Boucard, Head of Market Intelligence & Foresight at Colliers. "In the meantime, we are again observing a stronger decoupling of rent development. The trend is more selective and increasingly concentrated on those markets where high-quality space is available and continues to meet with correspondingly high demand. While individual locations are recording further rent increases, other markets are developing much more moderately. As a consequence, it is no longer possible to derive a uniform nationwide trend for rent development. For landlords, developers and investors, this means that the micro- and macroeconomic conditions of each location must be analysed and evaluated in a more differentiated way than ever before."

The IT industry remains the strongest user group with a share of around 16 percent. The manufacturing sector follows with around 13 percent and is showing particular momentum in Munich. There, this sector now accounts for more than 30 percent – driven primarily by technology-oriented companies and high-growth areas such as robotics and sensor technology.

The development underlines that the economic transformation is increasingly reflected in the office leasing market and that technology-driven uses are becoming increasingly important. In addition, a growing demand for space in the defense and aerospace sectors can be observed in Munich, which is already reflected in individual larger leases. Despite a market share of around 7 per cent of take-up in Munich, the segment has so far remained of subordinate importance at the level of the top 7 markets and only accounts for around 2 per cent of take-up in Germany as a whole.

The cumulative vacancy rate in the top 7 markets rose to around 9.0 million square metres by mid-2026. With a vacancy rate of 9.2 percent, the highest value since 2007 was reached. The increase affects all seven locations, but must be viewed in a very differentiated qualitative way. Only 14 percent of the vacancy rate is accounted for by space that has been completed since 2020. Berlin is an exception. There, this share is 22 percent (over 500,000 square meters). These figures are becoming more relevant against the backdrop of the completion pipeline. By the end of 2028, around 3.5 million square meters of office space will be completed in the top 7 markets. Currently, around 52 percent of these are pre-let. Here, too, Berlin occupies a special position with more than 1.2 million square meters of pipeline and a pre-letting rate of only 48 percent. In the other markets, new construction activity is much more restrictive.

"The increase in vacancy is less an expression of a crisis than the result of a profound market shakeout," explains Boucard. "Older existing areas that are no longer up-to-date in terms of energy and concept are increasingly losing their attractiveness. At the same time, a look at the project pipeline shows that the risk of overcapacity in the modern segment is strongly concentrated regionally. While Berlin is facing a real absorption task, the supply of new construction space in Frankfurt, Hamburg and Cologne will remain limited for the foreseeable future, thus curbing the momentum of the vacancy increase."

"For the second half of the year, we do not expect an abrupt trend reversal in demand for space, so we expect take-up of between 2.5 and 2.6 million square metres for 2026 as a whole," Ergüney sums up. "The market will require extremely precise selection in the coming months. Office properties remain in demand. However, investors and project developers need a deep understanding of the local characteristics and the unconditional focus on sustainable, ESG-compliant premium quality."

Office market in comparison (H1 2026 vs. H1 2025)