“Searching for office space in Cologne has become a great challenge”
Greif & Contzen’s latest analysis of Cologne’s office space market finds the vacancy rate at a record low, increasing rents and an ongoing demand surplus.
Florian Schmidt, Head of Office Properties with the Cologne-based real estate experts Greif & Contzen makes his point clear: “Vacancies in Cologne’s office space market have meanwhile decreased so much that searching for premises has become a great challenge.” The reason for this is the lack of space, and – as Greif & Contzen’s researchers point out in their recently presented analysis of the first nine months of the year – this also causes the increase of rent prices for offices to accelerate. The scarcity of available space is getting more and more severe, and the vacancy rate is expected to go down to 2.7 percent by the end of the year.
What does not exist, cannot be traded. Only around 210,000 square metres of office space were taken up in Cologne’s market during the first three quarters as a result. According to Greif & Contzen, a total take-up of 280,000 square metres of space is expected to be achieved by the end of the year. “This is still a good result. However, companies would be willing to rent significantly more space, if more properties were available that meet their requirements,” says Florian Schmidt.
Rents on the rise
The development of a number of key figures of Cologne’s office space market shows that rents have generally been increasing since 2016. The prime rent has risen noticeably over the past few months. This key figure refers to rents realised in the top price segment that account for about 3 percent of the total take-up of space. Based on Greif & Contzen’s analysis, it is currently EUR 22.50 per square metre. Compared to other top locations in Germany, it is still on a moderate level. However: “We assume that the current economic and market situation will last, at least for the time being. This means that there is further potential for rents to rise,” explains Schmidt.
New space is created, but it is not enough
Greif & Contzen’s researchers do not expect that this trend will be reversed any time soon. No more than around 55,000 square metres of new office space are scheduled for completion in 2018 – this is one quarter less than the average of the past five years. Moreover: “The space that is being created features high pre-letting ratios, or it never comes onto the market at all, because it is intended for owner-occupation,” says Schmidt. Meanwhile, Cologne continues to grow, demand for office space remains strong, and the office space available on the market will continue to fall short of the demand. In recent years, Cologne’s office space market was saved by the areas to the right of the river Rhine. Former industrial sites were and still are being revitalised and turned into office premises. The creative industries were the first to settle in this part of the city, and other industries followed. The districts on the right bank of the Rhine played an important part once again, during the first three quarters of 2018. Around one quarter of the overall take-up was realised in these areas. However, new space is not being created as quickly as it would need to be, and this is also true on the right bank of the Rhine. “We urgently need more construction measures, everywhere,” Florian Schmidt points out. A certain degree of relief will be provided by new construction projects that are due to be realised in the coming year. And yet: Pre-letting ratios are already high, so the scarcity of available state-of-the-art office space can be reduced, but it cannot be fixed.
The latest trend: coworking
The latest trends show that companies are already looking for solutions to the problems caused by the lack of space and the general increase of inhabitants and employees in Cologne: measures range from establishing home office concepts through to coworking facilities. Greif & Contzen has found that more than one tenth of space taken up during the first nine months of 2018 was already accounted for by coworking premises. “Concepts that allow for more flexibility both in terms of working hours and of space, will continue to gain significance,” predicts Schmidt. Cologne’s office space market remains in motion!