GERMANY – Rental growth in the German office sector will be hit by the “economic cool-down” expected for next year while retail properties will remain unaffected, according to HSH Nordbank.
The bank forecasts a decline in demand for real estate despite fairly strong occupier markets in recent years, leading to a slowdown of a “so far very dynamic” rental growth.
The bank analysed office markets in Berlin, Düsseldorf, Frankfurt, Hamburg, Hannover, Kiel, Cologne, Munich, Stuttgart and Bremen.
According to the bank, German GDP will only grow by 0.8% this year, dampening companies’ outlooks and leading to fewer hirings, which in turn will push up vacancy rates in offices from 2013.
Rental growth in the sector is expected to be around 0.5% with rental risks increasing slightly but still remaining moderate compared to other countries, the bank stressed.
On the other hand, rents for retail properties in the major cities will not be affected yet, the bank noted, as income is expected to stay high and consumption is still strong.
For 2012, the bank forecasts a growth in retail turnover of 2.8% leading to a higher demand for large retail areas that cannot be satisfied fully.
However, the strong 3.3% increase in top rents reported for 2012 will not continue at the same pace, as analysts expect some price adjustment leading to a more sideways development of rents in the sector.
One of the most sought after locations for retail businesses is the inner-city area of Hamburg, where demand outstrips supply and will drive up rents.