300.000 m² of rental performance in Cologne leads to an exceptionally good annual result for 2021; public sector leases clearly dominate.
The Cologne office property market is attracting attention in 2021 with an unexpected increase in office space take-up. Particularly in view of the potential knock-on effects of the coronavirus pandemic, an increase of around 40 percent on the previous year was not expected. Thanks to strong letting performance, the vacancy rate is also falling again. The maximum rent is rising to €31.50/m².
The positive trend from the third quarter of 2021 (+14 percent space take-up) is reinforced by large-scale leases, and space take-up of around 300,000 square meters can be reported for Cologne at the end of the year. This means that the Cologne office market was 40 percent above the previous year's level (215,000 square meters) at the end of the year. This good letting performance is particularly attributable to strong demand from the public sector, which accounted for one-third of space take-up. In total, the public sector leased around 100,000 m² of office space in Cologne in 2021, including five leases in the 10,000 m² range.
However, this also masks the fact that large-scale searches from the private sector remain scarce on the Cologne office market, with only one company in the range of over 5,000 square meters, Iqwig, Stiftung für Qualität und Wirtschaftlichkeit im Gesundheitswesen (8,000 m²), only one company in the 5,000 m² range can be found alongside the public sector. This is followed by the law firm CBH Rechtsanwälte with around 5,000 m² and the Academy of Media Arts with 4,950 m² (brokered by Larbig & Mortag).
The sector distribution is also clearly dominated by the public sector with a market share of around 35 percent. This is followed by the healthcare sector with a market share of around eight percent.
In the 2,000 m² to 5,000 m² segment, 13 leases were recorded (previous year: 8), which is also a good result compared to the previous year. The segment below 2,000 m² again performed consistently well this year. Larbig & Mortag Immobilien GmbH alone brokered around 80 transactions with a total area of approximately 34,000 m² in this segment.
The Ehrenfeld/Braunsfeld submarket performed particularly well this year, with a market share of 33 percent. Four leases of over 10,000 m² to the public sector in this submarket contributed significantly to this result. The Altstadt Nord submarket ranks second with a market share of around 11 percent and a leasing volume of approximately 33,000 m².
After around one and a half years, the vacancy rate is falling again for the first time and currently stands at 3.2 percent. This corresponds to available office space of around 262,000 m². In the same period last year, the rate was 3.64 percent, 12 percent above this year's result. The short-term increase in vacancies due to space that was offered on the market for re-letting in the wake of the coronavirus pandemic was offset by the high letting performance this year. The decline in the vacancy rate will lead to excess demand for space in some submarkets of the Cologne metropolitan area, such as the city center. In particular, large requests for space in excess of 5,000 square meters are meeting with a very limited supply of office space available at short notice.
Rents are at record levels in all sectors at the end of 2021. At €14.38/m², the average rent has exceeded the €14.00 mark for the first time and is eight percent higher than the previous year's figure. At €27.63/m², the prime rent is also above the previous high of €27.14/m² achieved in 2019. High-priced lettings in the Rudolfplatz and Kaiser-Wilhelm-Ring areas in particular are responsible for this exceptionally high result. With a maximum rent of €31.50/m², the €30.00 mark was broken for the first time this year. The rise in rental prices is also attributable to increased construction and material costs, which led to price increases, particularly for new construction projects.
Further large-scale lettings to the public sector are on the cards for the first quarter of 2022, some of which are in the region of up to 40,000 m² of office space. This suggests that the Cologne office property market can expect a good start to the year. In addition, there are a large number of active requests on the market that could not be concluded in the fourth quarter of 2021 but will ensure a good start to the year. Rental prices will continue to rise slightly due to demand and limited supply, as well as some significant increases in construction prices. The Cologne office real estate market will therefore prove to be crisis-proof and stable in 2022 as well.
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