Office market Cologne/Bonn at the end of 2022

(Cologne, December 20, 2022) The office real estate markets in Cologne and Bonn achieved record rental prices and good to very good letting performance in 2022. The Cologne/Bonn region is thus bucking the current crisis and giving hope for a resilient 2023.
Larbig & Mortag Immobilien regularly evaluates the market figures for the Cologne and Bonn office markets and publishes them in professional office market reports. Looking ahead to the overall results for 2022, positive trends can already be identified in both markets.

However, the factors influencing the rental market in 2022 have become significantly more complex. Companies will have to cope with issues such as the impact of the war in Ukraine in the form of gas and electricity supply, raw material shortages and supply chain disruptions, post-coronavirus trends such as working from home and New Work, a tight labor market, and decarbonization. Never before have there been so many challenges to tackle at the same time.

Nevertheless, companies in the two local office real estate markets of Cologne and Bonn have continued to develop within this framework and achieved surprisingly good results for the year as a whole.

Cologne's office real estate market impresses with record rental performance and a maximum rent of €39.00/m².

As of the current survey date, space take-up in the cathedral city stands at around 330,000 m². This means that Cologne has achieved its second-highest figure for the last 10 years as an office location (the highest figure was 380,000 m² in 2016). The result is approximately 10 percent above the previous year's result (2021: 300,000 m²).

The public administration sector clearly dominated the overall market with a market share of over 30 percent. This included two large deals of 45,000 m² and 42,000 m², which caused the transaction figures to skyrocket.

The vacancy rate is expected to close at an estimated 4.5 percent at the end of 2022 (2021: 3.2 percent). This significant increase of almost 30 percent is due to a large number of space reductions (including seven companies with approx. 80,000 m²) – and also by the trend toward downsizing office space in favor of home offices. The office property market in the cathedral city is expected to have between 370,000 m² and 390,000 m² of vacant office space available at the end of 2022.

All key figures in the rental sector continued to rise within a year. The most significant increase was in the area-weighted prime rent, which rose by 14 percent to around €32/m². The maximum rent rose to a record level of €39/m² in the same period in a central Cologne city center location, also rising significantly. The average rent rose by 16 percent to a record level of just under €17.50/m² (2021: €14.38/m²).

"We expect total annual take-up on the Cologne office market to be between 330,000 m² and 350,000 m². The exact size will depend on which rental agreements are concluded this year. There is currently a kind of "year-end rally" underway, which could improve the result even further," says Uwe Mortag, managing director of Larbig & Mortag Immobilien.

 

Bonn office real estate market with rental performance just below the 5-year average.

Looking at Larbig & Mortag's forecast for rental performance in 2022, the office real estate specialists currently expect the Bonn office rental market to land precisely in the range of the decline in space taken up.

The letting result will be in the range between 90,000 m² and 100,000 m² Of office space, "which means that the office market in the federal city of Bonn is now weathering not only the coronavirus pandemic but also the multi-crisis and is once again proving itself to be crisis-proof," says Hendrik Heßlenberg, managing director of Larbig & Mortag Immobilien Bonn.

With this result, the market is close to the 5-year average at the time of the survey, with around 114,000 m² of space. This is an extremely positive result, especially considering the external influences that landlords and tenants have experienced over the course of the year.

The low vacancy rate continued to focus attention on new construction and project space in 2022. This resulted in increases in the respective key figures for average rents, maximum rents, and prime rents. The maximum rent was already above €30.00 in 2022.

 

Outlook for 2023

Larbig & Mortag Immobilien is currently optimistic about the rental market in 2023. "In 2022, we were able to demonstrate our presence in the greater Cologne/Bonn area and our ability to successfully complete transactions in a difficult market environment. With almost 70,000 square meters of office space brokered, we can look back on very good letting results at both locations. Among others, we were able to provide intensive support to companies such as Renault Deutschland AG, Rimowa Deutschland, Huawei Technologies, and the Rheinische Friedrich-Wilhelms University of Bonn in their exciting projects," says Uwe Mortag.

"In the new year, the issue of ancillary costs will become even more important for users. Landlords will be much more concerned with ESG and sustainable construction/cradle-to-cradle in order to make properties more efficient, more ecological, and also more competitive," says Heßlenberg.

As usual, the commercial real estate specialists at Larbig & Mortag Immobilien will publish their comprehensive office market reports for the cities of Cologne and Bonn at the beginning of the year and make them available for free download at www.larbig-mortag.de.