26.000 m² of rental space in the first half of 2021 led to a 35 percent increase in office space turnover. However, the vacancy rate also rose significantly to 4.4 percent.
The Cologne office real estate market presented positive transaction figures for the first half of 2021. However, the initial effects of the coronavirus pandemic on the local office market are becoming apparent. The vacancy rate is rising due to restructuring, re-letting scenarios and remote working.
The positive trend from the first quarter of 2021 (+125 percent space turnover) continues, meaning that the Cologne office real estate market is also significantly above the previous year's result at around 126,000 m² of office space brokered in the first half of 2021 (first half of 2020: approx. 93,000 m²). brokered office space, around 35 percent significantly above the previous year's result (first half of 2020: approximately 93,000 m²). As there were no lettings in the segment above 10,000 m² in the second quarter, letting performance was down on the first quarter of 2021 (approx. 80,000 m²) at around 46,000 m².
This meant that the Cologne office real estate market achieved a higher transaction volume than the Düsseldorf market (approx. 95,000 m²) for the first time. In times of crisis, the Cologne market is showing the lowest fluctuations in a nationwide comparison.
The public sector remains the largest buyer of office space, accounting for approximately 26 percent and approximately 33,000 m² of the total. In the second half of 2021, Larbig & Mortag Immobilien expects further large deals to be concluded by the public sector. A third lease of approximately 19,000 m² of office space in Cologne-Ehrenfeld is already in the pipeline. In the first quarter, two transactions totaling 25,000 m² were already recorded in this submarket. This means that public sector transactions will dominate the office real estate market in 2021. This will have a significant impact on both the sector distribution and the location distribution.
Private companies are more cautious in this regard due to restructuring considerations and the continuing uncertainty surrounding the coronavirus pandemic. In the large-scale segment (over 5,000 m²), only two leases could be evaluated. On the one hand, the law firm CBH leased the new construction project "Haus am Rudolfplatz" with approximately 5,000 m². On the other hand, Larbig & Mortag Immobilien was able to broker a very long-term lease for approximately 5,500 m² to the Academy of Media Arts in the Heumarkt 14 property. Five leases were recorded in the 2,000 m² to 5,000 m² segment.
The Cologne office market also scored highly thanks to its broad mix of industries and large number of SMEs and start-ups in the under 2,000 m² segment. This size category has historically been the reliable basis of the office real estate market. Larbig & Mortag Immobilien handled 42 transactions in this segment with a total area of approximately 17,000 m². Thanks to the significant drop in infection rates at the end of the first half of the year, many SMEs are once again optimistic about economic development and are pushing ahead with expansion plans. This is stimulating the local office real estate market.
With a market share of around 36 percent, Cologne's city center was the most sought-after submarket in the first half of 2021. The Ehrenfeld/Braunsfeld submarket took second place due to the large public sector leases mentioned above. The Cologne West submarket follows in third place, also due to a large lease of approximately 16,000 m² by the public sector.
The vacancy rate changed significantly in the first half of 2021. At 4.4 percent, it rose significantly compared with the previous year (first half of 2020: 2.70 percent). This is attributable to approximately 60,000 square meters of space that was re-let, which is predominantly structured as large-scale offerings of 4,000 square meters or more by large corporations at short notice. In addition, the surrender of approximately 38,000 m² by Galeria Kaufhof in a central downtown location contributed to this significant overall increase.
The increase in the vacancy rate has led to a rise in the selection of available office space for current rental inquiries compared with the previous year. Companies with a total space requirement of 4,000 m² or more are benefitting particularly. For example, Larbig & Mortag Immobilien was able to list 19 properties with a total volume of approx. 150,000 m² in this segment. There are currently around 220 properties with a volume of approx. 200,000 m² under 4,000 m² actively being marketed throughout the city.
The average rent at the end of the first half of the year was €14.00/m². This figure is approximately seven percent higher than the previous year's result (first half of 2020: €13.10/m²) and is due in particular to a higher number of lettings in the city center. This is also reflected in the highest and prime rents. At €27.20/m², the prime rent is approximately 15 percent above the previous year's figure of €23.60/m². In the first half of the year, the maximum rent exceeded the €30.00 mark for the first time. A rental in the Kaiser-Wilhelm-Ring/Mediapark area achieved a peak value of €31.50/m²
Just under 160 leases were recorded and evaluated in the first half of the year (H1 2021: 190).
Thanks to the improved coronavirus situation in Germany, and in particular in the Cologne-Bonn metropolitan region, the outlook for the second half of the year is now more positive. Larbig & Mortag expects office space turnover to close slightly below the 10-year average (approx. 290,000 m²) by the end of 2021. The experts at Larbig & Mortag Immobilien anticipate total annual turnover for the Cologne office market of approximately 270,000 m².
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