Abstract
In contrast to various other European countries Germany’s commercial markets reflect a polycentric structure. In the global context four out of seven prime office markets are considered as competitive, viz. Berlin, Frankfurt, Hamburg and Munich. Attention is paid to the reasons of its moderate upward potential. On the other side the good performance of the German economy after 2009 significantly contributes to the specific profile of the German office market – a low-risk and low-yield market with long-term investment opportunities. Detailed insights into both office and retail real estate in the four major German markets is offered. The most relevant parameters for both commercial property types are analysed, the background of current market developments is discussed, future trends from both the macroeconomic and regional perspective will be presented. Specific attention is paid to an explanation for the different rental gradients for offices and retail in the four main metropolitan areas. Differences in investment returns between German, French and British office markets are revealed and confronted with investors behaviour. A general outlook for German commercial real estate is the finalizing part of this chapter.
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Notes
- 1.
There is no comprehensive database covering German office stock. Estimates are usually based on the number of office employees plus assumptions regarding the size of a single workplace. In the recent past however, some extensive stock surveys have been conducted in many large German cities (Düsseldorf: Flüshöh and Stottrop 2007; Duisburg and Wuppertal: Busch and Spars 2009a, b; Frankfurt/Main: Salostowitz 2008; Aengevelt 2006; BulwienGesa and Baasner Stadtplaner (2008), a general overview). Several others are currently being planned or implemented (Bonn, Krefeld, Mönchengladbach). Consequently, estimates of total German office stock are increasingly based on solid database foundations.
- 2.
Using the gif-office space figures, the ratio is 25.1 m2 per office employee, and when reduced to reflect the amount of vacant office space the ratio is roughly 23.4 m2 per office employee (Von Einem et al. 1991).
- 3.
Office stock of over 7 million m2, average annual take-up above 100,000 m2.
- 4.
Office stock between 1.5 and 4 million m2, average annual take-up usually above 35,000 m2.
- 5.
Office take-up is defined as the sum of all space that is let, pre-let or sublet as well as when a development for an owner-occupier is initialised or sold to an owner-occupier within a precisely delimited office submarket and a defined period (gif 2008).
- 6.
Available for free download at http://www.gif-ev.de.
- 7.
Marginally-employed persons have a monthly income below €400 and are exempt from social security contributions.
- 8.
Official statistics provide no data on office employment and the available classification by service industries is insufficient. The method of aggregating individual professions to professional groups and determining fixed office employment quotas for each of them was first verified by empirical evidence by Dobberstein (1997). These days, quotas determined in this way are generally accepted, and various interim adjustments have been made.
- 9.
Official statistics provide information on annual construction activity regarding office and administrative schemes. However, these figures should be treated carefully. Often the volumes of certain developments are not, or only partially, specified, in some cases completion dates are wrong, leading to significant deviations from the reality. Thus, we recommend recourse to market data (available for all seven top cities) provided within the annual gif survey and by BulwienGesa, including the volume of new supply based on the sum of individual completions.
- 10.
Net initial yields are defined as the ratio of net rental income to purchasing price including additional costs (taxes, notary costs, agents etc.). For details see: gif e.V.: Yield Definitions Real Estate Investment Management (2007).
- 11.
Calculated by dividing the purchasing power ratio by the turnover ratio.
- 12.
All rents refer to new lettings and where possible to premises of about 100 m2 ground-floor retail space with step-free access, good building condition and a shop front of around 6 m. Rents given are nominal values.
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Schulten, A., Denk, U. (2014). Rent Gradients in Germany’s Metropolitan Commercial Real Estate Markets. In: Nozeman, E., Van der Vlist, A. (eds) European Metropolitan Commercial Real Estate Markets. Advances in Spatial Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-37852-2_8
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