Office Space Market Cologne: continuously high demand and rising rents – vacancy rate declining at a slower pace
In their latest market report, the property experts of Greif & Contzen analyse the first three quarters of 2019
For 15 years now, the real estate experts of Greif & Contzen have been publishing their analyses of Cologne’s office space market in the form of detailed reports. One and a half decades in which Cologne’s office space market has experienced steady growth: the amount of existing space has increased by a total of around 1.1 million square metres in this period. This is a huge figure that corresponds to the size of 154 football pitches or four times the size of the entire exhibition area of Koelnmesse. About 40 copies of Cologne's tallest office building “KÖLNTURM” in the MediaPark area would need to be created to obtain 1.1 million square metres of office space.
Nevertheless, the increase of space has been no match for the demand for office space in recent years. Indicators of this situation are the vacancy rate and the rent prices: if availability is low and demand is high, the vacancy rate will drop and prices will increase. Cologne's office space market reacted in the exact way described in textbooks: the vacancy rate that stood at around 8.2 percent when Greif & Contzen’s first Office Space Market Report was published in 2004, decreased continuously in recent years and according to Greif & Contzen’s forecast, it will be as low as 2.1 percent by the end of the year.
Meanwhile the unweighted average rent increased by almost three euros per square metre over the past 15 years to currently around 14 euros. In their current Office Space Market Report that comprises an analysis of the first nine months of 2019 and a forecast for the rest of the year, the real estate experts of Greif & Contzen note that the average rent weighted according to unit size currently stands at EUR 16.50 per square metre. It has thus increased by EUR 1.50 over the course of this year alone. Since the start of the year, the prime rent has increased by EUR 1.00 to currently around EUR 24.00 per square metre. The maximum rent agreed upon for units with very high quality fit-out in top locations rose by as much as EUR 4.00 in 2019, and is now EUR 29.00 per square metre.
Good times for landlords of office premises
“Cologne’s office space market is characterised by a long-term growth trend,” points out Benedikt Graf Douglas, Management Executive and Head of Office Properties at Greif & Contzen Immobilienmakler GmbH. This means that times are good for landlords of office premises. And according to Greif & Contzen, the situation will remain unchanged for the time being, as the current economic slowdown is not noticeable in Cologne's office letting market for now. Around 205,000 square metres of office space had been taken up by the end of the third quarter, and there are still requests for space that cannot be catered for.
Most larger units are located in property developments
Larger coherent units in existing buildings are particularly scarce. There are only a few units of more than 5,000 square metres left in such properties that are available for rent at short notice. The situation is not much better in the segment from 3,000 square metres upwards either: the choice is very limited in existing buildings, in this size category too. New development projects have been able to benefit from these circumstances, and apart from a few exceptions, new leases agreed upon for larger units were accounted for by new and refurbished buildings in the year to date. The biggest rental deal closed so far this year, was a 17,600 square metre unit taken up by Sparkasse KölnBann in the construction project “KITE” in Ossendorf.
High volume of completions in 2019
Greif & Contzen’s property experts expect that a total of around 280,000 square metres of space will be taken up in Cologne’s office letting market by the end of the year. This would correspond to a decrease of 10 percent since 2018, however, it would still represent a strong level of take-up. The metropolis on the Rhine is also experiencing busy construction activity: various construction projects with a total of around 160,000 square metres of office space are scheduled for completion by the end of the year, according to the calculations performed by Greif & Contzen’s researchers. This corresponds to an increase of almost 100,000 square metres compared to the year before. The biggest project “MesseCity” alone accounts for just over 40 percent of the new office space.
Focus topic: positive development around Blaubach
The “focus topic” is an established part of Greif & Contzen’s market reports. In the anniversary edition, the property experts are taking a particularly close look at an area in the southern part of the historic city centre that has been increasingly evolving into a sophisticated office location in recent years: the neighbourhood around Blaubach. “Over the past eleven years, the area has been subject to a steady revitalisation process that is going to continue in the future,” explains Benedikt Graf Douglas. Several large-scale property projects have been realised in this part of Cologne’s inner city over the past few years. Organisations, companies, and property developers have discovered the area with its favourable location in close proximity to the business districts of the city centre, the Rhine, and various cultural and recreational offerings, and have started to replace the rather inhomogeneous structures. The German Society for Development and Investment (DEG), a subsidiary of the KfW Banking Group, has settled in the area, the 17,500 square metre office building “Cäcilium” was completed here, and the former site of the police station on Waidmarkt has been transformed to feature hotels, residential buildings, retail and office space. Benedikt Graf Douglas expects that “the positive development of the neighbourhood is going to continue. The former headquarters of the HRS corporation on Blaubach 32 are currently subject to an extensive revitalisation measure. In addition to this, the mixed-use ‘Antoniter Quartier’ that will also comprise office space, is currently being created next to the Antoniter City Church and the well-known ‘Weltstadthaus’.” The head of Greif & Contzen’s office space division points out that there is more development potential, especially along the “Bäche” streets where there are further older office buildings.