With almost 285,000 square meters of office space brokered in Cologne and 98,500 square meters in Bonn, we can look back on a successful 2017. In Cologne, approximately 285,000 square meters of office space were brokered in 2017. The result cannot match the previous year's figure (380,000 square meters), which was influenced by the major deal with Zurich Insurance (over 60,000 square meters). In Bonn, the result improved compared with the previous year, with 98,500 square meters of office space brokered compared with 91,925 square meters.
overview - The Cologne office market
- Average rent increases by 5 percent to EUR 12.47/m²
- Maximum rent: EUR 23.50/m²
-vacancy rate (310,000 m²) falls to 3.9 percent
- In 2018: 123,400 m² under construction
Slight increase in rental prices
In terms of rental prices, the past year saw a slight increase of 5 percent. The average net cold rent rose from EUR 11.85 per square meter in 2016 to EUR 12.47 per square meter. By contrast, the prime rent rose slightly by 2.5 percent and now stands at €21.56 per square meter.
A few locations (Kaiser-Wilhelm-Ring, Belgisches Viertel, and Mediapark) achieved a maximum rent of €23.50 per square meter. A total of 19 rental agreements were concluded at a net cold rent of over €20 per square meter. In the previous year, there were 15 leases in this price segment. At €2.89 per square meter, the average ancillary costs for office buildings remain unchanged. In high-rise buildings alone, these can vary by more than €4.50 per square meter.
Three deals over 10,000 square meters - Last year, three large leases were brokered, each for just under 20,000 square meters of office space.
Leases in the range up to 20,000 square meters
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Leases in the range between 5,000 and just over 10,000 square meters
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A characteristic feature of the Cologne office market is that a large number of leases are concluded by small and medium-sized companies (up to 60 employees). Accordingly, these companies are generally interested in office space of around 1,000 square meters. This tenant group accounts for 39 percent of the brokerage volume. Of the total of 430 office lease agreements evaluated, 380 were for spaces of up to 1,000 square meters. In 2016, 451 contracts of this size were signed, accounting for 34 percent of the total. Lease agreements for this amount of space were signed by the following companies, for example: BARMER GEK | Deutsche Bahn AG | Deloitte & Touche GmbH | Dembach Goo Informatik GmbH & Co. KG | FONCIA IMMONOVA | Ströer SE & Co. KGaA | Warner Bros. ITVP Deutschland
public administration and the service sector are the top demanders
In terms of sectors, the largest tenant groups are public administration, communications and media companies, and service providers, which account for 51.4 percent of the office space brokered. The real estate industry (7.5 percent), consulting (4.8 percent) and retail companies (4.1 percent) were also strongly represented.
Office locations on the right bank of the Rhine continue to gain in importance
As in 2016, there was increased demand for space in office districts on the right bank of the Rhine (particularly in Deutz and Mülheim) last year. 35 percent of lettings were transacted on this side of the Rhine. The most important office locations continue to be inner-city locations on the left bank of the Rhine. In Cologne's city center (left bank), 28.8 percent of new leases were signed. Between 5 and 7.5 percent of the rental performance was accounted for by Ehrenfeld/Braunsfeld, Zollstock, and Marienburg/Bayenthal.
Significantly more office space under construction
Around 104,000 square meters of office space is expected to be completed in the course of the year. The largest project, covering 19,000 square meters, is the new Butzweilerhofallee building in the Ossendorf district. Further buildings are located in the city center, in Lindenthal, Deutz, and Kalk. The completion volume is thus above the average for the past ten years (80,000 square meters). In recent months, there has been a slight increase in the average lease term (2016: 5 years, 2017: 5.25 years). The vacancy rate fell further by 3.9 percent, from 390,000 square meters to 310,000 square meters.
overview – The Bonn office property market
-average rent: EUR 12.22/m² (2016: EUR 13.06/m²)
- Highest rent: EUR 21.75/m²
-vacancy rate (95,200 square meters) falls to 2.5 percent
- In 2018: 45,300 m² under construction (of which 28,000 m² is for own use)
Top deals – Two transactions involving more than 10,000 square meters were particularly noteworthy in 2017:
- BWI GmbH: approx. 15,000 m² (on the Auerbach campus)
- Information Technology Center Bonn: 10,470 square meters (Bonn Bad-Godesberg)
Together, these two leases account for 26 percent of the total result (98,500 square meters). In 2016, the comparable figure was 91,925 square meters, representing an increase of 7 percent.
Total number of transactions declines – positive development for properties over 5,000 square meters
A total of 132 rental agreements were recorded in Bonn last year. Spaces larger than 5,000 square meters accounted for the largest share at 44 percent. The largest tenant group is public administration, which accounts for the majority of space turnover (42 percent) with 41,000 square meters. This is followed by companies in the service sector with 27,300 square meters.
Popular location: Bonn city center (inner city, north, south, west)
There has been a notable increase in rentals in the city center, particularly in the north of the city (30,400 square meters; 31 percent of space). The federal district accounted for 22 percent and Bonn-Bad Godesberg for 14 percent. Compared to the federal district, the city center ranked significantly higher in the office market zone rankings, mainly due to large leases of over 12,000 square meters in Bonn's Nordstadt district.
High demand meets declining supply
The average rent on the Bonn office market fell slightly (6.4 percent) compared with the previous year's result (13.06 euros per square meter) to 12.22 euros per square meter of usable space. Only 19 rental agreements were concluded that exceeded the calculated average rent. The contract with the highest rent was concluded at €21.75 per square meter of usable space for office space in the former Landeszentralbank, which is currently undergoing revitalization (2016: €24.14 per square meter).
Terms: Companies secure new space for the long term
The average lease term for office leases concluded rose by 27 percent to 7.6 years. In the previous year, it was 6 years. The longest lease terms were concluded for space sizes of 1,000 square meters and above. The average term for segments below 1,000 square meters was 4.8 years. A total of approximately 15,100 square meters were completed in 2017. Currently, 45,300 square meters are under construction. The construction phase of the "Rhein-Palais Bonner Bogen," the "Vicus" and "Bonnjour" projects are among those that are not being built for owner-occupancy. In the coming months, the "Haus der Höfe" project will be implemented on the former site of the Bonn Center under the name "Neuer Kanzlerplatz." In the long term, this could ease the situation on the Bonn office market.
Forecasts for 2018
Overall, the outlook for the office property market is good and offers many opportunities for all market participants in 2018. Some medium-sized companies will not be able to afford the higher rents, especially in central city locations.
The Cologne office market in 2018
- possible slight increase in rents to EUR 12.60/m
- Brokerage performance (with 290,000 m²) could be at
comparable to the previous year's level
- Completion of approx. 123,400 m² of office space in the course of the year
(slightly less than in the previous year)
- continued trend toward reducing vacancies in the coming year
(improvement only from 2019/2020 with the completion of new construction projects)
The Bonn office market in 2018
- expected brokerage volume: 70,000 m²
- steady decline in vacancy rates
- average rents will remain at the same level as in the previous year
- no significant increase in supply (due to low completion rates)
- Completion of additional new construction space is not expected until 2019/2020
Both cities have a very low vacancy rate, which is expected to continue falling over the course of this year. When searching for modern office space in the cities of Bonn (< 1.000 square meters or contiguous areas up to 3,000 square meters) and Cologne (3,000 square meters or more), it is therefore necessary to allow sufficient time or focus on new construction projects, as they are already leased well in advance due to the low supply. Residential construction, on the other hand, has been booming in both cities for around five years. As additional residents of these cities not only need to live but also work, a comparable commitment in the commercial real estate sector would be desirable.
More detailed information and further analysis can be found in our office market reports. These are available free of charge, as is the 2017 Cologne Investment Report, at the following link: http://larbig-mortag.de/marktberichte.html
