While London dithers over Brexit, Frankfurt is quietly expecting to reap the rewards of its status as a long-established financial centre, delegates heard at the PropertyEU Outlook 2017: Europe and Germany briefing, which was held this week in Frankfurt. The city is also competing directly with Berlin to become the country’s main fintech hub.
'The British government is taking its time and it is a complex situation, but the office sector in Frankfurt will definitely benefit, as it is the city in the best position,' said Olaf Atja Lemmingson, head of international business, communities and financial markets at Wirtschaftsforderung Frankfurt. 'It has long had a strong focus on the banking sector and financial service providers, and recently fintech has developed well.'
The presence of a financial cluster in place already is a huge plus for Frankfurt in the competition with other European cities to attract banks and companies that may have to relocate staff and offices from London to a EU country, said Thomas Beyerle, managing director of Catella Property Valuation. 'By April next year we hope to see more announcements from banks that they are moving part of their operations to Frankfurt,’ he said, leading to a ‘substantial boost in the medium to long term'.
Frankfurt has also just opened its 'tech quarter' near the Trade Fair, which is a centre for established companies as well as start-ups focusing on all kinds of digital innovation, and is fast attracting fintech companies that want to be there to serve the needs of the financial companies in the city. 'We are already seeing a move of fintech companies from Berlin to Frankfurt,' said Lemmingson.
Frankfurt’s other advantages are a high quality of life, with short commuting times at affordable prices, said Lemmingson, and a strong base in research and education, with institutions like the School of Finance and Management and the Institute of Law and Finance providing a huge talent pool for banks and companies.
Prospects are bright for the office sector, but there are challenges. Time is one of them: if banks relocate from London they would have to be there by June 2018 at the latest, as the UK's existing treaties will remain in force until then. According to Catella research, much of the additional office space planned for Frankfurt for this year and the next has already been snapped up (98,000 m2 of the 164,00 m2 due in 2016 and 39,000 m2 of the 65,000 m2 planned for 2017). Others projects under construction will not be complete until the end of 2018.
Quality is another issue: Frankfurt's current vacancy rate is high at 11.8%, so there are some 1.36m m2 of office space available but, Beyerle pointed out, 'it is doubtful whether it is of sufficient quality and in the right locations. We believe only 100,000 to 150,000 m2 can be identified as target properties. This would result in cut-throat competition over this space, inevitably leading to rising prices in the banking district and city submarkets.'
Foreign banks and institutions will want to be in the best places in the centre of town and for this reason, said Daniel Younis, managing director at ING REF Germany, 'we are very optimistic on offices in general but in particular on Frankfurt's CBD.'
