3. The Bonn office rental market was more subdued in the third quarter, but positive trends remained. The momentum that had prevailed on the Bonn office market in the first half of 2020 flattened somewhat in the third quarter.
Leasing decisions are being postponed or canceled altogether, partly due to the uncertainty surrounding new waves of infection and restrictions. However, this situation does not apply to all size segments. At the end of the third quarter of 2020, an increase in leasing activity was again observed.
In the search requests for spaces larger than 1,000 square meters, only limited leasing activity was recorded compared to the first six months of 2020. New space requests in this size category were either not initiated at all or only cautiously. Amidst the discussion about working from home and the resulting potential space savings, this was an expected reaction from office seekers in Bonn. In contrast, demand from the public sector in Bonn is not declining and remains very active on the market – a major plus point for the Bonn office rental market. At the end of the third quarter of 2020, the commercial real estate specialists at Larbig & Mortag Immobilien, exclusive partner of the NAI apollo group, reported lettings of around 62,340 m² of office space. Compared to the first half of the year, this represents an increase of approximately 13,798 m². The largest single lease of approximately 5,500 m² was secured by the public administration in an office property in Bonn Gronau.
The increase in space is the result of a total of 18 new leases signed in the third quarter. It should be noted that in the size segments up to 1,000 m², Office space. For office space up to 500 square meters, a total of 40 lease agreements were concluded by the end of September. twelve leases have been signed for space exceeding 1,000 m², giving this segment a market share of 80.0 percent.
At 3.25 percent, the vacancy rate is above the 3.0 percent mark for the first time since the end of 2015. This corresponds to a total vacancy of around 128,500 square meters of office space. The increase compared with the half-year figure for 2020 is primarily attributable to a large vacancy of around 20,000 square meters in Bonn Endenich.
The predicted rise in average rents began in the third quarter of 2020. During the third quarter of 2020, the mix of different property qualities was not comparable to previous years. Newly concluded rental agreements showed significantly higher rents, with the average rent standing at around EUR 12.39/m². This represents an increase of approximately EUR 0.61/m² on the average rent calculated in the first half of 2020. The maximum rent remains at EUR 22.83/m² and has not changed in the past three months. The prime rent changed by EUR 2.14/m² from EUR 20.99/m² (first half of 2020) to EUR 21.61/m². The leases responsible for this were concluded in various submarkets of the office market (Gronau/Bundesviertel, Bonn's southern district and Bonn city center).
The Bonn office leasing team at Larbig & Mortag expects the Bonn office market to achieve space take-up of between 90,000 m² and 100,000 m² by the end of 2020. It can be predicted that various large deals will still be concluded by the end of the year. If we now look at the five-year trend (letting performance: 99,000 m²) for the Bonn office market for comparison, the forecast for the Bonn office rental market is very positive, despite all the disruptions caused by the coronavirus. Nevertheless, due to the latest developments in the current case numbers, interested parties will be revising their calculations of space requirements and reviewing their own work organization. It is not possible at this stage to predict what impact this will have on the office market in 2021.
