Germany Market Environment
- Largest economy in the Eurozone.
- Fourth-largest economy in the world.
- Growth in the German economy remains robust and broad-based.
- GDP is expected to grow 1.6% in 2017.1
- AAA credit ratings from Fitch, Moody's and Standard & Poor's.
- Largest property investment market in the Eurozone.
- Mature industry with a transparent business environment.
- Growing number of foreign investors attracted by stability, liquidity and growth potential.
Office Real Estate Sector2
- Germany;s robust economy continues to drive demand for office space in the top five cities – Berlin, Munich, Frankfurt, Hamburg and Düsseldorf.
- Strong demand has seen activity spill over from Central Business District (CBD) locations to city fringes, and even secondary and tertiary markets.
- Office real estate remained the strongest asset class in 2016, with investments in the segment accounting for about half of total commercial transaction volumes.
- The five key cities accounted for about three-quarters of commercial transaction volumes nationwide.
- Capital values in the top five cities were boosted by rising prime rents and falling yields.
Leasing and Vacancy Rates
- Leasing: Figures remained strong in the five key cities, reaching 3.2 million sqm in total, with Berlin and Munich leading in take-up rates of 888,300 sqm and 789,400 sqm respectively.
- Vacancies: Rates in the top five cities continued to drop, such as from 4.9% and 12.1% in Munich and Frankfurt respectively at end-2015, to 4.1% and 11.1% at end-2016.
Average Prime Rents
- Top five cities: Figures continued to climb in most cities in 2016, such as from €23.50/sqm/month in 2015 to €27.50/sqm/month in 2016 for Berlin, and €25.00/sqm/month in 2015 to €26.00/sqm/month in 2016 for Hamburg.
- Secondary cities: Figures remained stable in Bonn (c. €18/sqm) and Darmstadt (c. €13/sqm) and have risen in Münster (c. €14/sqm) as at end-2016.3
- In all, €52.5 billion in commercial real estate changed hands in 2016.
- The office sector accounted for about half of the €24.8 billion in market transaction volumes.
- The five key cities remained the top choice for investors, accounting for about three-quarters of total office investment volumes.
- Heavy demand in top locations has prompted investors to look at sustainable investment real estate in other areas.
- Investment levels were supported by Germany's status as a relatively safer investment haven, particularly for foreign investors, who invested €10.8 billion in the sector.
- Germany remains one of the world's most attractive markets for real estate investment.
- Investment activity in office properties is expected to remain sturdy in 2017.
- Continued high demand from international investors, especially for large-scale office investment opportunities, is expected for the top five cities.
- Domestic investors are also expanding their portfolios because of political uncertainties worldwide.
- Solid demand, given moderate completions and a limited pipeline, could continue to drive up prime office rents.
- The sector is expected to see a sharp rise in foreign capital inflow in 2017, with yields declining moderately.
- Association of German Chambers of Industry and Commerce, 2017
- CBRE Germany Office Investment Q4 2016, 2017
- Jones Lang LaSalle, Property Reports from IREIT's Asset Valuation in Q4 2016