The Cologne office property market is developing extremely positively, with 169,000 m² of space let in the first three quarters of 2021 and a maximum rent of €30.50/m². The positive trend on the Cologne office property market continued in the third quarter of 2021. Letting performance and rental prices remain at a good level. Only the vacancy rate continues to rise.
By mid-2021, space take-up on the Cologne office property market was already around 35 percent above the previous year's figure. This strong trend slowed somewhat in the third quarter of 2021, but is still 14% above the same quarter last year. Space take-up amounted to 169,000 m² (Q3 2020: 145,000 m²). This means that the impact of the coronavirus pandemic is continuing to recede and companies are slowly returning to "business as usual" despite the effects of the pandemic and the associated regulations. Only large companies and corporations are currently still in an exploratory phase, searching for the best workplace model. Companies' offices will have to face the challenges and rapid change brought about by the coronavirus. The quality of buildings and the right choice of working environment will play an important role here. "However, working from home will not become synonymous with the office. Employees want to return to the office to improve social contact, communication, and knowledge transfer," says Uwe Mortag, managing director of Larbig & Mortag Immobilien. These issues will influence the local office space market over the next 12-18 months
In the first nine months of 2021, a total of approximately 260 rental agreements were concluded (third quarter of 2020: approximately 290), which is fewer than in the same period last year.
An analysis of the deals in the various size categories shows that there was a particular increase in the 1,000 m² to 5,000 m² segment (21 deals compared to 17 in the previous year) and in the 5,000 m² and above segment (six deals compared to two in the previous year). In the size category up to 1,000 m², a total of 200 deals were recorded, which is fewer than in the previous year (258).
In the large-scale rental segment of 10,000 m² and above, the public sector was the only source of demand. This sector clearly dominated the overall market in the first three quarters with a market share of over 35 percent. It was followed by the services sector (9.5 percent) and consulting (7.7 percent).
The vacancy rate continues to rise, closing the third quarter at around 4.5 percent (third quarter 2020: 3 percent). This increase of 34 percent is due to the rise in large-scale vacancies (space sizes of 5,000 square meters or more). In this segment alone, approximately 90,000 m² of office space in existing buildings came onto the market. This increase in space is due to the effects of the coronavirus pandemic and the general structural change brought about by digitalization. Insurance companies, banks, and the retail sector are particularly affected by this. As a result, sublet and replacement space is coming onto the market. This means that the office property market in the cathedral city currently has around 383,000 m² (third quarter of 2020: 241,000 m²) of vacant office space available.
All key rental figures recovered within a year of the coronavirus pandemic. The most significant increase was in prime rents, which rose by 14 percent from €23.70/m² to €27.50/m².
The maximum rent rose to a record level of €30.50/m² in the same period, an increase of eight percent. This maximum value even exceeds the level of 2019 (€29.00/m²). Similarly, the average rent rose by 6 percent to €14.00/m² (third quarter of 2020: €13.20/m²). This means that the average rent is back at the level it was before the coronavirus pandemic (end of 2019: €14.10/m²)
The positive forecast for the end of the year remains unchanged. Developments in the first three quarters of 2021 continue to point to a positive outlook. "Fortunately, demand for office space has picked up again, which is having a correspondingly positive effect on the office market. The positive development of rental prices also demonstrates companies' confidence in their office locations for the coming years. Changes in the world of work and regulations on mobile working and home offices will continue to occupy the office real estate market," says Uwe Mortag.
The experts at Larbig & Mortag Immobilien expect total annual turnover in the Cologne office market to reach up to 270,000 square meters. The exact figure will depend on whether the number of rental agreements concluded continues to increase overall and in the 1,000 m² range. The public sector will continue to dominate the rental market as a tenant until the end of the year
About Larbig & Mortag Immobilien GmbH:
Larbig & Mortag, a partner of the NAI apollo group, was founded in 2008 by Markus Larbig and Uwe Mortag as an independent commercial real estate brokerage firm and currently employs 40 people across the group in the greater Cologne, Bonn, and Leverkusen area. The focus of real estate consulting is on office and warehouse leasing and commercial investment, as well as retail leasing through the subsidiary conceptstories Immobilien GmbH. In-house research also supports these areas with sound figures. This enables the consultants to offer services along the entire value chain of an office property. From market analysis and property valuation to marketing concepts for existing buildings and new construction projects (letting and sales). The owner services department rounds out the range of services.
For almost 14 years, clients have relied on Larbig & Mortag's market penetration, innovative and targeted advice, and personal and sustainable support. As a local and independent market player, Larbig & Mortag is one of the leading office property consultants in the greater Cologne, Bonn, and Leverkusen area. Mortag Immobilien is one of the leading commercial real estate consultants in the greater Cologne, Bonn, and Leverkusen area. A supraregional and international cooperation with the NAI apollo group network integrates Larbig & Mortag as a regional specialist into a network with several German, European, and global locations.
