Frankfurt Office Market heats up as banks firm up Brexit relocation plans
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1 November 2017
Frankfurt Office Market heats up as banks firm up Brexit relocation
plans
Frankfurt am Main – Analysis from leading real estate firms and investors shows
demand and prime-rents in the Financial Centre Frankfurt reach record highs, while
the vacancy rate steadily declines to its lowest point in years. Nearly sixteen months
after the Brexit referendum, developments in the Frankfurt Office Market clearly reflect
Frankfurt’s popularity amongst banks leaving the United Kingdom. As an estimated
10,000 jobs relocate to Frankfurt over the next four years, numerous construction
projects will help to meet high demand for premium office space.
Increased demand in the market has driven investor confidence and analysts report a
notable increase in transaction volume in comparison to 2016. Additionally, Frankfurt
has also seen larger deals exceeding 10,000 square meters as firms seek larger,
contiguous office space to accommodate their expanding operations and personnel.
Despite increases in demand and prime-rents, the Financial Centre Frankfurt remains
competitively priced relative to other European financial centres.
These developments are discussed in detail by the branch heads Frankfurt Main
Finance member BNP Paribas Real Estate, José Martinez and Oliver Barth. Additional
observations and perspectives are given by real estate experts from KGAL, Savills
Investment Management, and Jones Lang LaSalle (JLL).
José Martinez and Oliver Barth, Managing Directors and Frankfurt Branch Heads
of BNP Paribas Real Estate
“The Frankfurt office market is continuing to expand rapidly. With a take-up of 477,000
square metres, it achieved its best result of the last 15 years. This outstanding
performance puts the city third behind Berlin and Munich. Remarkably, demand is
spread relatively evenly across all size classes and market segments, thus testifying
to the broad basis for this demand. On a particularly encouraging note, several large-
scale deals in excess of 10,000 square metres emerged again at last. After the
shortage of the last few years, they are currently accounting for 20% of total volumes.
One of the largest contracts (around 27,500 square metres) was signed by Helaba in
Kaiserlei.
Supply is keeping pace with the robust demand of the last two years. Currently, 1.51
million square metres of office space are vacant, down 10% on the third quarter of
2016. However, only around half of this floor space, namely 749,000 square metres,
exhibits the high-quality modern fittings being sought by tenants. At 9.8%, the vacancy
rate across the entire market has now dipped below the 10% threshold. At this stage,
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Frankfurt Main Finance e.V. Walther-von-Cronberg-Platz 16 60594 Frankfurt am Main
Press Contact: Dr. Ralf Witzler Telephone 069 94 41 80 50 Telefax 069 94 41 80 90 ralf.witzler@fmfinance.de
the extent to which Brexit leaves traces on future trends in the Frankfurt commercial
real estate market still remains to be seen. The fact is that, although Brexit is being felt
on the Frankfurt market, it is not a dominating factor. BNP Paribas Real Estate is in
initial, good and promising talks with potential relocators. The fact that something is
going on is also reflected in the deals by Morgan Stanley and Goldman Sachs that
have secured substantial floor space in Frankfurt. If all current inquiries in the market
coincide with signings by Brexit banks, this could theoretically cause a bottleneck
situation in the Frankfurt CBD, where currently only 120,000 square metres of modern
office space are available. In fact, in the banking district, only about 66,000 square
metres are vacant. An estimated 150,000 square metres are required for the 10,000
employees expected to additionally come to Frankfurt. However, on the basis of total
vacancies, Frankfurt would not experience any problem offering suitable office space
if push comes to shove, although not all of this would be in the CBD. The situation will
be eased by a number of attractive development projects that are currently under
construction such as WINX, Omniturm and Marienturm, which will be completed in time
in 2018/2019 and still have vacancies.
At this stage, all signs are pointing to continued brisk demand until the end of the year.
Accordingly, total take-up for the year as a whole should come to between 750,000
and 800,000 square metres, resulting in one of the best years ever. Simultaneously,
we expect vacancy rates to continue shrinking, meaning that rents will probably rise to
some degree.”
Gert Waltenbauer, CEO of KGAL
“Frankfurt can strengthen its post-Brexit role as a leading financial centre and
additionally enhance its appeal, as the decision made by a number of London banks
to base their EU headquarters in Frankfurt shows. The airport is conveniently located
near the city centre and is a genuine Frankfurt asset, the importance of which will
continuously increase with growth in trade and European integration. Office buildings
in Frankfurt in particular are rising substantially in value as a result. However, what we
are also noting is that residential quality has improved in Frankfurt over the last few
years and this is having a corresponding effect on the intrinsic value of residential real
estate.”
Andreas Trumpp, Savills Investment Management
“From our point of view, Frankfurt offers a wide range of affordable office space both
in the CBD and in B locations and could effortlessly absorb a further 10,000 office
workers. The inflow could only be limited by the lack of available housing. In any case,
the retail and food sectors would profit from the influx of well-payed bankers. As one
of the world’s major financial centres, Frankfurt boasts outstanding accessibility, i.e.
an airport which is close to the city and superbly integrated in the public transport
system as well as the short routes within the city and the entire region. The local
companies, political and research institutions attract highly qualified specialists from all
around the world, thus contributing to diversity in the city.”
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Frankfurt Main Finance e.V. Walther-von-Cronberg-Platz 16 60594 Frankfurt am Main
Press Contact: Dr. Ralf Witzler Telephone 069 94 41 80 50 Telefax 069 94 41 80 90 ralf.witzler@fmfinance.de
Markus Kullman, Associate Director Office Leasing Frankfurt am Main, JLL
“Brexit has reached Frankfurt. Preliminary signings have been completed over the last
few weeks.
JLL is in constant close contact with a very large number of companies that expect
Brexit to impact some of their business segments. Service providers addressing the
financial sector are also exploring the market for suitable floor space. However, the
Frankfurt office real estate market is not an unknown quantity for most potential tenants
as they already have at least a small representative office in the city.
Neben einer verfügbaren Auswahl an potenziellen Flächenalternativen von hoher
Qualität wird von ihnen vor allem die gute Infrastruktur, wie beispielsweise der
Flughafen, sehr geschätzt.
In addition to an available selection of potential high-quality alternative spaces, they
especially appreciate the excellent infrastructure, for example the airport.
After already becoming evident last year, one fact has been confirmed in our recent
talks, namely that it is not a question of a full-scale relocation of a large number of jobs
from London to Frankfurt but of incrementally building up the necessary capacity. And
in the most important cities of Europe. Apart from Frankfurt, Paris, Amsterdam, Dublin
and Luxembourg also play a role. We expect around 100,000 square metres of office
space to be absorbed above and beyond customary market demand in the wake of
Brexit.
True, there are some signs of a shortage of floor space in some parts of Frankfurt. For
example, we can only offer a small selection of legacy properties in the traditional
banking region. This particularly applies to high-quality contiguous floor space of more
than 5,000 square metres. That said, the large number of new construction projects,
such as OmniTurm, MarienTurm and the Four project at the former Deutsche Bank
site, will push more than 250,000 square metres of new office space onto the market
between 2019 and 2022. Accordingly, we do not expect the recent rise in demand to
trigger any massive increase in prices in the Frankfurt market in the medium term. At
the moment, the top rent is at EUR 37.50/m²/month, the highest among the Big 7 and
at a vacancy rate of 8.2%, also the highest among the German real estate hubs.
However, in the areas where the focus of the companies in question is located, it is
significantly less. Depending on submarket and quality, it may currently only be 4-6%.”
Hubertus Väth, Geschäftsführer, Frankfurt Main Finance e.V.
“The availability of commercial real estate is the least of Frankfurt’s concerns. Over a
period of 5 years, 250,000 square metres of new office space will be created in several
new high-rise buildings. Currently, 19 buildings are under construction and 26 in the
planning phase in Frankfurt. As it was, there was already need for action in the
residential market. Now conditions have worsened. The situation with respect to micro-
apartments for commuters and high-rise living is better than with affordable housing
for the mass of interested parties. However, the problem is known and there is still
some lead time. Accordingly, it should be manageable with combined forces.”
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Frankfurt Main Finance e.V. Walther-von-Cronberg-Platz 16 60594 Frankfurt am Main
Press Contact: Dr. Ralf Witzler Telephone 069 94 41 80 50 Telefax 069 94 41 80 90 ralf.witzler@fmfinance.de
The Financial Centre Frankfurt is in the pole position to win banking business from
London following the results of the UK’s referendum. Noted for its strong economic and
political stability, Frankfurt and the region offer a top infrastructure, a deep talent pool
and an extremely high quality of life. Financial services moving to Frankfurt will find a
competent, helpful and welcoming regulator in BaFin, who will accept large portions of
applications in English. The Financial Centre is already home to more than 150 foreign
banks and 75,000 people employed in financial services.
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Frankfurt Main Finance e.V. Walther-von-Cronberg-Platz 16 60594 Frankfurt am Main
Press Contact: Dr. Ralf Witzler Telephone 069 94 41 80 50 Telefax 069 94 41 80 90 ralf.witzler@fmfinance.deContact Person for Media Inquiries:
Dr. Ralf Witzler
Frankfurt Main Finance e.V.
COLOSSEO
Walther-von-Cronberg-Platz 16
60594 Frankfurt am Main
Telephone 069 94 41 80 50
Telefax 069 94 41 80 90
ralf.witzler@fmfinance.de
BNP Paribas Real Estate
BNP Paribas Real Estate, one of the leading international real estate providers, offers its clients
a comprehensive range of services that span the entire real estate lifecycle: property
development, transaction, consulting, valuation, property management and investment
management.
With 3,900 employees, BNP Paribas Real Estate supports owners, leaseholders, investors
and communities in their projects thanks to its local expertise through 36 countries (16 direct
facilities and 20 through its Alliance network) in Europe, Middle East and Asia.
BNP Paribas Real Estate generated € 704 m revenues in 2016 with, for property development,
154.000 sqm of completions and more than 1,500 homes launched; € 24.1 bn assets under
management in Investment Management; 38m sqm managed in Property Management; 6.2m
sqm taken up and € 19bn invested in Transaction; and three main types of Consulting services:
Real Estate Advisory for occupiers, Building Consultancy and Outsourced Real Estate
Management.
In 2017, BNP Paribas Real Estate merged with Strutt & Parker, one of the UK's largest
independent property partnerships.
KGAL
KGAL Group is a leading, independent asset and investment manager with an investment
volume of €21.5 billion, across 87,000 investors. The Group, founded in 1968, operates across
Europe and has its registered office in Grünwald near Munich. It focuses on long-term capital
investments for institutional investors in the property, aircraft and infrastructure asset classes.
335 employees contribute to achieving earnings that are stable in the long term, taking into
account aspects of revenue and risk.
Savills Investment Management
Savills Investment Management is an international real estate investment manager with offices
in Amsterdam, Copenhagen, Frankfurt, Hamburg, Hong Kong, Jersey, London, Luxembourg,
Madrid, Milan, Munich, Paris, Shanghai, Singapore, Stockholm, Sydney. Tokyo and Warsaw.
As at 30 June 2017, Savills Investment Management managed total assets of around $18.2
billion.
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Frankfurt Main Finance e.V. Walther-von-Cronberg-Platz 16 60594 Frankfurt am Main
Press Contact: Dr. Ralf Witzler Telephone 069 94 41 80 50 Telefax 069 94 41 80 90 ralf.witzler@fmfinance.deSavills Investment Management is the brand name for entities in the Savills Investment
Management group, including Savills Investment Management LLP, Savills Investment
Management (UK) Ltd, Savills Investment Management (Luxembourg) Sàrl, Savills Investment
Management (Jersey) Limited, Savills Investment Management SGR SpA, Savills Investment
Management (Germany) GmbH, Savills Investment Management KVG GmbH, Savills
Investment Management Pte Ltd, Savills Investment Management Asia Limited, and Savills
Investment Management (Hong Kong) Limited.
Savills Investment Management LLP is a limited liability partnership registered in England No:
OC306423 regulated by the Financial Conduct Authority.
Savills Investment Management is regulated in the UK, Italy, Germany, Jersey, Japan and
Luxembourg.
JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering
specialized real estate services to clients seeking increased value by owning, occupying and
investing in real estate. A Fortune 500 company with annual fee revenue of $5.8 billion and
gross revenue of $6.8 billion, JLL has more than 300 corporate offices, operates in more than
80 countries and has a global workforce of more than 77,000. On behalf of its clients, the firm
provides management and real estate outsourcing services for a property portfolio of 409
million square meters, and completed $136 billion in sales, acquisitions and finance
transactions in 2016. Its investment management business, LaSalle Investment Management,
has $60.1 billion of real estate assets under management. JLL is the brand name, and a
registered trademark, of Jones Lang LaSalle Incorporated.
Frankfurt Main Finance
Frankfurt Main Finance is the voice of the leading financial centre in Germany and the euro
zone, Frankfurt am Main. The initiative has more than 40 members including the State of Hesse,
the cities of Frankfurt and Eschborn, and dozens of prominent actors in the finance sector.
Through their membership and engagement, they all demonstrate their close relationship to
Frankfurt and desire to position Frankfurt amongst the top national and international financial
centres. Frankfurt Main Finance leverages the influence of its members to advocate for the
Financial Centre Frankfurt and provide high-caliber dialogue platforms. For more about Frankfurt
Main Finance and its members, please visit www.frankfurt-main-finance.com.
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