The Pfandbrief 2011 | 2012

Latest Developments on the Rental Markets
Office Markets in Germany
The German office centers are increasingly benefiting from the economic upturn, and in turn
are helping to rekindle the interest of international investors. Whereas in 2010, rental income
already rose perceptibly compared with the previous year (albeit from a low level), vacancy levels,
too, appeared to have reached a turning point at the beginning of 2011. Among Germany’s
major office markets, Frankfurt continues to report by far the highest vacancy rate. However,
vacancies should be gradually reduced as a result of the ongoing rise in turnover of floor space
combined with low new construction volumes.
Despite Germany’s strong economic growth, given the slump suffered and the uncertainty
which still persists in the wake of the financial and economic crisis, only a subdued improvement
is to be expected on the rental markets. A broad-based upturn on the German office markets
is not anticipated until the second half of 2012 at the earliest.
Office Market Situation and 12-month Trend
Berlin
Düsseldorf
Frankfurt
Hamburg
Cologne
Leipzig
Munich
Stuttgart
69
Landlords’
market
Tenants’ market
Source: Eurohypo RAC Research
Thus, office markets will on the whole remain tenants’ markets in the current year. A broadbased
increase in rents cannot yet be expected, as supply is still high. Letting activity will
probably continue to be strongly driven by office space optimization. This means that it will be
very difficult to market older, inefficient properties which no longer meet modern standards.
By contrast, modern office premises will remain in demand. Because supply shortages arise
most quickly in prime properties in A1 locations, peak rents will rise slightly in some places.
On balance, the current year is likely to see a trend of polarization in the market, with modern
properties in prime locations on the one hand and suboptimal properties in secondary submarkets
on the other.