Bonn office market with solid letting results in the "corona year." A total of 95,895 square meters of office space was let on the Bonn office market in 2020, a year marked by Covid-19. Compared to the five-year trend of approximately 104,600 m², the total letting volume is around 8,700 m² below the average recorded over the past five years.
In view of the recurring restrictions throughout 2020 and in direct comparison with other office markets, the result is nevertheless convincing. Average rents are rising, while prime and maximum rents are falling. Public administration was once again the main driver of turnover.
The rental market
In 2020, the commercial real estate specialists at Larbig und Mortag Immobilien, exclusive partner of the NAI apollo group, recorded a total of 98 lettings on the Bonn office market. The largest lease agreement was signed by Engagement global in Bonn's federal district, with approximately 20,000 m² of rental space. In terms of the number of deals concluded, the segment up to 1,000 m² (81 deals) continues to form the basis of the office rental market, but the largest space turnover was achieved in the segment above 2,000 m² (53,815 m² In comparison with the previous year, total space turnover declined by approximately 14.9 percent (2019: 112,645 m²). The majority of Bonn-based companies have focused on the topic of home offices as a result of social restrictions and have successfully implemented this concept – however, this did not result in a large return of unused office space. Many companies will continue to offer home office as an additional option in the future – working on site will not be replaced by home office.
Revenue driver: public administration
In addition to the largest single lease of 20,000 m², another large lease of over 10,000 m² was identified in Bonn Dransdorf (public administration). Furthermore, the Federal Agency for Real Estate concluded two contracts for over 5,000 m² and 7,500 m² (both in Bonn's federal district) for users in the public administration sector. In total, approximately 58.7% of the total annual result was generated by leases to public administration. The fact that Beethoven's city is an interesting and ideal location for ministries and authorities is underlined by the recent award of the contract for the Bonn location of the European Weather Authority. From 2021, around 150 employees will be working for the weather authority in Bonn. It remains to be seen how long Bonn will remain an attractive location for ministries and public authorities. There are growing calls in the market and in politics for the public administration agencies based in Bonn to relocate to Berlin. The largest individual leases not taken out by public administration users include approx. 2,800 m² (real estate sector – Bonn Beuel), approx. 2,000 m² (IT consulting – Bonner Bogen) and 1,600 m² (services – Bad Godesberg).
Vacancy rate rises slightly
The vacancy rate at the end of 2020 was 2.70%. This means that around 107,100 m² of office space is vacant on the market. This means that the vacancy rate in Bonn's office market has exceeded 2.5% for the first time since 2016. This vacancy rate did not ease at all during the course of the year and will only remain at this level for a short period of time. The large leases that were not finalized at the end of 2020 have only been postponed for reasons of timing and will be concluded in the first quarter of 2021. This will not result in any new vacancies, and new construction activity remains too low to ease the critical vacancy situation.
Average rents rise – maximum and prime rents decline
The pressure on average rents predicted by Larbig & Mortag began to emerge in the course of 2020. The average rent rose to EUR 12.49/sqm, an increase of EUR 0.49/sqm compared with 2019 (EUR 12.00/sqm). In the course of 2020, the mix of different property qualities was not comparable to previous years. Newly concluded rental agreements featured significantly higher rents, which led to an increase in average rents. Maximum and prime rents fell significantly compared with the previous year. The maximum rent was concluded in Bonn's Südstadt district at EUR 22.82/m² (2019: EUR 28.50/m²), and the prime rent at EUR 21.61/m² (2019: EUR 26.33/m²), resulting from deals in the submarkets of the federal district and city center (consisting of the center, north, south, and west of the city).
Federal district again most sought-after submarket
In Bonn's federal district, a total of 13,620 m² more office space was leased under rental agreements, with a total take-up of 40,525 m² compared to 2019 (26,905 m²). In Bonn's city center, letting performance declined very significantly. In this submarket, letting performance amounted to only 13,715 m². Compared to 2019 (69,937 m²), this represents a decline of 56,222 m². This is mainly due to the lack of space available within the submarket.
Forecast for 2021
The letting activity in 2020 was the result of the momentum at the beginning of the year and a strong fourth quarter in 2020. It was therefore clear that demand for new office space remained strong despite the coronavirus pandemic. However, the sector breakdown also shows that the overall letting performance of the Bonn office property market is heavily dependent on public sector turnover. Various large-scale leases will also have a strong influence on the letting result in 2021. It will be interesting to see how companies in the private sector react to the development of the pandemic in the course of 2021 and in what form and to what extent new space requests will be initiated. Many space requests planned for 2020 have been postponed to the first two quarters of 2021. In addition, there are once again interesting requests for over 5,000 m² on the office market, which will result in lease agreements being signed in 2021. If society and the economy return to something close to normal in the course of 2021, space take-up of between 90,000 m² and 100,000 m², i.e. just below the five-year trend. Due to the shortage of space, leases will primarily be agreed for new construction projects or properties with high building standards. This will lead to a further increase in average rents. The maximum rent will also rise. The vacancy rate will fall below the 2.5 percent mark in the course of 2021.
