Weathering the pandemic with ease
Office rents in Cologne remain stable even in these challenging times, and market participants are optimistic regarding the months ahead
The market participants’ confidence in Cologne’s office space market remains high, despite the COVID-19 pandemic. This is illustrated by the market data presented by Greif & Contzen’s real estate experts in their latest report of the office space market. The economic downturn caused by the corona crisis did lead to lower take-up figures. However, at about 28 percent, this decrease was less pronounced in Cologne than in some of Germany’s other top office space markets, and rents remain stable.
Expressed in figures this means: Take-up of space decreased from 290,000 square metres in 2019 to 210,000 square metres in 2020. At EUR 14 per square metre, the average rent remained unchanged, and the same is true for the prime rent of EUR 26 per square metre.
“The corona-related restrictions were and still are tough for many companies. However, a general sense of optimism can be observed in Cologne’s office space market, as the German economy is expected to recover over the course of the year. We anticipate that the number of office workers in particular will remain at least stable in Cologne. Demand for office space is therefore likely to persist, and rent prices are also stable, despite the crisis,” says Benedikt Graf Douglas, a management executive of Greif & Contzen Immobilienmakler GmbH. The low availability of space in Cologne’s market also contributed to preventing rent levels from declining. No significant price reductions could be observed, due to the fact that available space has been so scarce. While the vacancy rate of currently 2.9 percent is slightly higher than in 2019 (2.3 percent), it continues to be extremely low, making it a key factor that shapes Cologne’s real estate market.
Three large-scale long-term letting contracts concluded over the past few months for units ranging between 10,000 and 19,700 square metres, highlight the market participants’ confidence in a rapid recovery. The 19,700 square metres big unit was taken up by the auditing firm KPMG that is going to relocate its Cologne branch from Barbarossaplatz to the MesseCity complex in Deutz. The major development MesseCity is by now fully let except for its final part. “Property developers have generally continued to pursue their plans in Cologne’s market,” says Andreas Reul, who took over the role as Head of Office Properties at Greif & Contzen from Benedikt Graf Douglas at the start of January.
Reul continues to explain that significant changes are to be expected in the medium term, nevertheless. Such changes are going to apply to the general conditions of office-based work in particular, owing to the trend of decentralised working structures. The fact that employees have been increasingly working from home in the context of measures to contain the spread of the coronavirus, has not given rise to substantial amounts of office space being vacated in Cologne to date. On the one hand, this is due to the fact that rental agreements cannot be terminated or changed within just a few weeks or months, and on the other hand to the fact that realising new approaches to office-based work is also a lengthy process. “The past few months have certainly accelerated the introduction of innovative working concepts, such as the trend to work from home, desk sharing approaches or open-plan concepts,” Reul points out. “Changes have been initiated in the office space market, but it will take years for these to be implemented.”
The real estate experts of Greif & Contzen expect a stable development in Cologne’s office space market in 2021, without any major anomalies. Andreas Reul is optimistic: “We assume that we are going to leave behind the corona-related restrictions in public, private and business life. The office space market is going to gain momentum over the course of the year, and slightly higher take-up figures than in 2020 will be realised.”