ZEW/gif Office Market Forecast - Rents For Offices in Prime Locations Strongly Increase

Prime rents at the five largest German office real estate markets Berlin, Hamburg, Frankfurt, Düsseldorf and Munich will considerably increase by the end of 2012. At the same time, the vacancy rate will hardly be reduced –with the exception of Düsseldorf and Frankfurt. These are the findings of the second survey among real estate market experts, which was conducted by the gif-Arbeitskreis Marktanalysen und Bedarfsprognosen (gif market analysis and demand forecasting working group) in cooperation with the Centre for European Economic Research (ZEW) in Mannheim.

In particular, rents for office real estate in Berlin and Munich will strongly increase. The majority of survey participants expect that prime rents in these cities will increase by three per cent in 2011 and around 3.5 per cent in 2012. Thus, Munich will pass the mark of 30 euros per square metre by the end of 2012. It appears that rents of 40 euros per square metre are likely in Frankfurt.

"From experience we know that rents outside prime locations change later than prime rents," says Dr. Jaroslaw Marowski, co-organiser of the survey. "We will see if and when the predicted increase of prime rents is going to occur at other locations."

With regard to the development of returns in the office real estate industry, the experts’ opinions vary. For 2011, a clear majority of the survey participants expects that the returns will decline. For 2012, however, some experts believe that increasing returns are likely. "Forecasts on returns are considered difficult and uncertain," says Prof. Dr. Felix Schindler, ZEW researcher and head of the survey evaluation. "Accordingly, the results regarding the development of prime rents are less precise."

With respect to reducing vacancies in office real estate, the experts are less optimistic. They do expect a small reduction at the locations for office real estate analysed by ZEW and gif. Düsseldorf and Frankfurt are the cities which do best in reducing vacancies. Optimistic forecasts suggest that the vacancy rate in both cities will decline by one percent point to around 11 per cent in Düsseldorf and 14 per cent in Frankfurt by 2012.

The fact that this survey was successfully conducted for the second time and additional survey participants took part is particularly positive. "The forecasts we received were made independently and are rather homogenous, reflecting the optimistic basic attitude of the economic sector," says Ullrich Werling, co-organiser of the survey. "The number of responses and the similarity of the results indicate that the real estate market experts who participated in the survey are very professional."

According to Thomas Beyerle, head of gif working group, the ZEW/gif Office Market Forecast is a valuable contribution for increasing the transparency in the real estate industry. "The survey’s progress and outcome is just one more reason to continue with this project."

For further information please contact

Prof. Dr. Felix Schindler, Phone +49 621/1235-378, E-mail schindler@zew.de