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Wednesday, Apr 02, 2025

Rising Office Vacancies Stalk German Cities Amid Economic Uncertainty

The economic downturn and home office revolution leave their mark on office real estate across major German cities.
In recent years, the landscape of office space in German cities has undergone a dramatic transformation.

This shift, driven largely by the widespread adoption of remote work during the coronavirus pandemic, continues to echo through urban centres such as Berlin, Hamburg, Munich, and Frankfurt.

The current confluence of economic challenges and workplace evolution is creating a complex scenario in the commercial real estate market.

According to a recent report by real estate consultancy Jones Lang LaSalle (JLL), office vacancies in Germany's seven largest cities have notably increased.

While there has been a mild recovery in the rental market in 2024, with a reported surface area uptake of 2.7 million square meters, this figure remains 30% below the average of the past decade.

The data underscores a significant shift in demand patterns, where traditional leasing is failing to keep up with pre-2020 benchmarks.

Vacancies in these metropolitan areas—Berlin, Hamburg, Munich, Frankfurt, Düsseldorf, Cologne, and Stuttgart—continue to rise.

The immediate availability of office spaces in these cities measures up to 6.7 million square meters, reflecting a rise in the vacancy rate to 6.8% from 5.8% at the end of 2023.

The factors at play extend beyond the advent of remote work trends.

The ongoing economic downturn is exerting a profound influence, provoking a more cautious approach from businesses sensitive to geopolitical and macroeconomic uncertainties.

According to Konstantin Kortmann of JLL, the current atmosphere of unpredictability hampers large-scale relocations and expansions, with significant lease agreements exceeding 10,000 square meters predominantly involving the public sector.

As some organizations such as Deutsche Bank and SAP advocate for a return to office environments, the broader corporate inclination is toward downsizing.

This trend aligns with previous projections by the Ifo Institute and real estate advisor Colliers, predicting a reduction in demand for office spaces by more than 10% in major German cities by 2030.

Businesses are increasingly favoring 'smaller but finer' offices, a demand that skews towards modern, sustainable spaces while leaving older, unrefurbished buildings behind in a state of obsolescence.

These developments suggest a pivotal moment for the commercial real estate sector as firms navigate the dual pressures of adapting to new work paradigms and persisting economic volatility.

The ongoing recalibration of office space necessity signifies a reshaping not just of physical landscapes but also the strategic priorities of businesses across Germany.
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