Shift in German office market locations, Colliers TK

Demand for office space in Germany is increasing in the Central Business Districts (CBD) and central areas, according to property advisers Colliers Trombello Kolbel. The advisers also found that the shift in demand is affecting both the letting and the investment market equally.

The high demand for offices in the CBDs and in central areas is compounded by an above-average reduction in vacancy in these locations over the last few months. According to the Colliers, the low number of completions in the previous year has added to the scarcity of available space and led to an increase in rents. As a result, Colliers said the CBDs and central locations are now showing signs of being a landlord's market.

However, the shift has been at the expense of fringe areas and suburbs, where supply now exceeds demand. As a result, the advisers noted that rents in these locations remain comparatively low and take-up is achieved almost exclusively on price. Colliers added that project developments in fringe areas and suburbs are only starting if at least 60% is already pre-let.

Colliers added that the below-average take-up of office space in fringe areas holds a risk for properties with average remaining lease periods when reletting, particularly if they are more than 10 years old. According to the property advisers these properties had seen the most significant downward yield shift up till now.

Marc Kleinpeter, managing director of Colliers Trombello Kölbel said: 'All the same, a whole series of sellers expect prices for these properties which are simply no longer in line with the market. 'In his view there will be one sale or another in the current year at below the previous value assumed. Price competition will therefore dictate that these locations are a buyer's market.