Frankfurt office market slows as large deals decline, but prime rents rise

The Frankfurt office market has experienced a slowdown in take-up this year, largely due to a lack of large deals. So far, 258,600 square meters of office space has been leased in 2024, a figure 4.4% below the same period in 2023 and 18% lower than the 10-year average, according to data from Savills.

Christian Krieg, Team Leader of the Office Agency at Savills in Frankfurt, explained the drop in activity: “The below-average lettings performance is primarily due to fewer new leases being signed.” In total, 300 leases have been agreed upon so far this year, compared to an average of 420 over the past decade. Notably, there have been only two leases of more than 7,000 square meters, compared to an average of five such large deals per year over the last decade.

Krieg attributed this decline to both economic uncertainties and the shift toward hybrid working models, which have reduced the demand for office space. Many companies are opting to extend their existing leases rather than relocate. “Users are postponing moves due to the current economic situation, leading to fewer large lettings,” he said.

Adding to this, Fabian Kupczyk, Co-Team Leader of the Office Agency at Savills, noted that landlords’ investments in existing spaces are also encouraging tenants to stay. “Tenants are increasingly demanding high-quality office spaces but are struggling to afford the high rents of new-build projects. Landlords who invest in upgrading their existing properties can offer these premium spaces at a lower cost than new developments,” Kupczyk explained. However, he warned that rising costs could make such upgrades more challenging for landlords in the future.

Despite the decrease in take-up, prime rents in Frankfurt have continued to rise. In the third quarter, the prime rent increased by 2.2% to €46.00 per square meter, while the average rent dropped slightly by 0.8% to €24.80 per square meter. The city’s vacancy rate also rose, increasing by 30 basis points to 10.3% compared to the previous quarter.

Krieg noted that the rise in prime rents is being driven by limited availability of high-quality office space and the current interest rate environment. “While vacancy rates continue to climb, particularly for lower-quality buildings in less favorable locations, prime rents are being supported by the scarcity of premium space,” he said.

Looking ahead, Savills predicts that both prime rents and the vacancy rate will continue to rise through the end of the year. However, take-up is expected to surpass last year’s level, despite the ongoing challenges facing the market.