• Take-up in top 5 locations totalled approximately 1.86 million sq m in the first three quarters of 2010 (+18% compared to 2009)
• Solid rental levels
• Vacancies continued to rise over the months of July to September

In the months of July to September the upward trend, which had begun in the first half of 2010, continued in the major German office markets Berlin, Düsseldorf, Frankfurt, Hamburg and Munich. The amount of office space transacted in the five markets over the first three quarters of the year totalled just below 1.86 million sqm and thus was up approximately 18% year-on-year. Robert Kellershohn, Director Office Agency at Savills Germany, says: “The economic recovery has clearly reached the office letting markets. Some of the major enquiries currently in the market should be completed prior to the year end resulting in a total transacted volume well above the level of 2009.”

Contrary to the situation of the first half of the year when primarily Düsseldorf recorded a significant rise in take-up, in the past quarter all markets except for Berlin benefited from an increased demand for office space. In a year-on-year comparison Düsseldorf still shows the highest increase in take-up of 89%. Frankfurt (+24%), Hamburg (+24%) and Munich (+11%) recorded a clear rise too. In Berlin take-up reduced by slightly in excess of 5% compared to the year before.

The prime rents remained virtually stable in all markets compared to Q2 but stand below levels seen in previous years across the board. In contrast the average rents outperformed the 2009 figures in all cities except for Düsseldorf. This is not least attributable to the high turnover achieved in the central office submarkets.

Despite increased demand vacancies continued to rise throughout Q3 in some markets (Düsseldorf, Frankfurt, Hamburg) whilst others retained levels seen in the previous quarter (Berlin, Munich). On average 10.5% of the total available office stock was unoccupied in the five markets at the end of September.

Although the amount of new office completions has decreased in recent months and vacancies are set to rise only marginally throughout the final quarter, a high proportion of the current vacant stock is secondary and does not meet demand criteria. We therefore expect part of this vacant stock to remain as structural vacancy even in the case of a sustained market recovery. The total transacted volume for 2010 is anticipated to total just below 2.3 million sq m and therefore reflects an increase of about 10% - 15% compared to last year.

For a reliable forecast of the longer-term perspective it remains to be seen whether the German economy will be able to maintain its strong pace which is questionable given the world economy’s weakening dynamics.