Wanted: Office Space in Cologne
Greif & Contzen issues its latest report of the office space market at the start of the year: price increases and scarce availability of space continue to characterise Cologne’s market, the situation is unlikely to relax any time soon.
In 2009 it was 8.1 percent. Ten years later, it is down to only 2.6 percent: the vacancy rate in Cologne’s office space market has been plummeting for several years now. This means one thing in particular: “Available office space has become scarce,” says Florian Schmidt, Head of Office Properties at the Cologne-based real estate company Greif & Contzen. “Most of the existing units have been taken up. Companies tend to be forced to factor in more time for their establishing, growth or relocation endeavours, and to wait until other existing units become vacant again, or until new buildings are completed.”
Rents on the rise
Greif & Contzen’s researchers predicted last February that the availability of office space would become even scarcer over the course of 2018. They also expected that the lack of space would cause the increase of office rent prices in Cologne to intensify. Their predictions turned out to be correct. Only provisional figures were published at the start of this year, but the overall trend is very clear: The average rent weighted according to unit size increased by just under ten percent over the course of the year. It currently stands at around EUR 15.00. The prime rent rose from around EUR 21.50 to about EUR 23.00 per square metre. Properties with high-quality fittings that are available at short notice have become extremely scarce, and as a result they tend to generate above-average prices both in the city centre and in the most popular suburban districts. The highest rent realised in the past year was around EUR 25.00 per square metre.
Take-up of space on par with last year’s figures
A total of around 310,000 square metres of office space was taken up in 2018, thus matching the previous year’s result. “It could have been even a little more than that, if adequate units were available,” explains Schmidt. The lack of space is especially pronounced in inner city locations: here vacancies have decreased by almost 40,000 square metres, or 37 percent, in the past year. “As a result, rent price increases can not only be achieved for new leases, but some companies have also had to face significant rent increases when renewing existing leases,” says Schmidt. In recent years, price increases used to prompt companies to look for new premises. Owing to the current scarcity of space, this alternative tends to be rather difficult to realise.
Growth sector co-working
There is one industry that benefits from the lack of space: co-working facilities and business centres. In the overall context of expansion that could also be observed in other top business locations, this industry has been able to increase its share of office space taken up to around ten percent. The sector accounted for only four percent, the year before. In sought after locations and at the corresponding rental conditions, a number of operators secured units in new buildings or mint condition units in existing buildings. With its new leases, Design Offices GmbH accounted for ranks one and seven of the list of major units taken up. The co-working provider took up around 13,000 square meters in the new construction project I/D Cologne in Mülheim, as well as around 5,600 square metres in the new premium property Kaiser Hof in the city centre.
2019: High demand continues to be met by low availability
So what about 2019? – “Cologne’s businesses have a rather positive outlook on the whole, so we expect demand for office space to remain solid,” says real estate expert Florian Schmidt. Due to the fact that economic forecasts are now lower, Greif & Contzen’s researchers assume that demand for office space will decrease slightly, but that availability will continue to be too low, nevertheless. “The expected economic development combined with the low vacancy rate and higher rent prices, makes it appear likely that a total of around 280,000 square metres of office space will be taken up in 2019,” predict the experts from Greif & Contzen. Further moderate rent increases are also conceivable. There continues to be a lack of office units that are available at short notice. This means that it is very likely that the same situation will be described in the next few reports of Cologne’s office space market: high demand meets low availability.