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1、dzhyp.deREAL ESTATE MARKET GERMANY 2025A research publication by DZ HYP|March 2025Decline in new construction on housing market Marked differences between office space and retail sectors1Real Estate Market Germany202502 Preface03 Summery06 Economic conditions in Germany07 Construction activity is sl

2、owing down significantly08 Special topic:hotel real estate in Germany14 Turnaround in real estate investment?16 Retail properties30 Office properties45 Multi-family houses53 Glossary54 Imprint 58 DZ HYP locationsTABLE OF CONTENTS2Real Estate Market Germany2025Dear readers,The last few years have bee

3、n quite a challenge for the German real estate market.In 2025,market performance continues to be hampered by factors such as the weakness of the German economy and structural change impacting individual asset classes.However,the overall outlook is noticeably brighter,not least because valuation mark

4、-downs are set to come to an end.At the same time,the markets are becoming increasingly heterogeneous.Here,a more differentiated picture emerges not just when comparing different segments but also when examining the growing impact of various influencing factors within the different asset classes.Thi

5、s real estate market report analyses the development of the retail,office and residential segments at the top locations in Germany Hamburg,Berlin,Dusseldorf,Cologne,Frankfurt/Main,Stuttgart and Munich.The study shows how the housing market is being shaped by high demand at a time when construction p

6、roject and completion numbers are declining.This divergence is affecting the top locations in particular,its impact also depending on factors such as migration numbers,supply structure and vacancy rates.The markets for office and retail properties are undergoing fundamental structural changes.Faced

7、with changing requirements,more and more existing properties are failing to supply what the market demands.The first signs of a revival were seen on the investment markets in mid-2024,mainly on account of falling interest rates.After a significant increase,rental yields stabilised at higher levels,w

8、hich also put an end to valuation corrections.This study includes a section that examines current developments on the real estate market for hotels.Despite difficult economic conditions,the hotel industry is enjoying steady growth in the number of overnight stays.At the same time,the industry is fac

9、ed with cost increases and a shortage of skilled workers both factors that drive market concentration.The 2025 German real estate market report is available in both German and English.All current reports can be downloaded from our website(on www.dzhyp.de/en/about-us/market-research/).Yours faithfull

10、y,DZ HYPMarch 2025PREFACE3Real Estate Market Germany2025SUMMARY A number of negative factors have proved challenging for the real estate market in recent years,leading to a sharp decline in valuations.The motto“Survive till 25”has not only helped the market through the crisis,but has also proved acc

11、urate since the correction came to an end in 2024.Higher interest rates,climate investment and the structural change caused by home working and e-commerce have now been priced in.Real estate investment-which has declined sharply-could also pick up pace again gradually in 2025 with the prospect of se

12、veral interest rate cuts by the ECB.However,conditions remain fragile for commercial real estate,partly due to the ongoing economic slowdown.Potential risks include further funds outflows from open-ended real estate funds and unfavourable rental prospects for many older commercial properties.Moderni

13、zation is also being hampered by financing constraints due to a decline in valuations,higher interest rates and potential vacant properties.Residential properties offer the best prospects,not only because there is already a housing shortage and the construction crisis is restricting supply even furt

14、her.Unlike companies which can successfully manage their business with less office or shop space,people need living space.Even apartments in less attractive locations or with obvious deficiencies can still be easily let,while concessions have to be made to potential tenants for commercial real estat

15、e outside the small segment of modern and sought-after space.Residential rents show consistently strong growth,whereas retail rents have at best stopped falling,and the office market is characterized by an increasing number of vacant properties.In this respect,it could also gradually become more dif

16、ficult to achieve significantly higher rents in the prime segment.However,there is potential in all segments of the real estate market.Premises are needed for working,to sell products,or for housing,and are correspondingly in demand.The prospects are particularly good in the seven largest cities:Ber

17、lin,Cologne,Dsseldorf,Frankfurt,Hamburg,Munich and Stuttgart.This is reflected in the 17th issue of our market report on the leading German real estate locations.As usual,we focus on the office,retail and residential market segments.Wide divergence in valuations of residential and commercial propert

18、ies Property valuations,2010=100 Falling interest rates but only at the short end intensify tailwind for the property market in 2025 Deposit rate and bond yields,in%Source:vdp Source:Bloomberg,DZ BANK Research forecast Per:February 2025 8010012014016018020022020102012201420162018202020222024resident

19、ialcommercial1.62.02.42.83.23.64.0June2024Sep2024Dec2024Feb2025+3month+6month+12monthECB deposit rateBunds 2YBunds 5YBunds 10YforecastThe 17th issue of our market report shows that although conditions remain challenging in the real estate market,the outlook has brightened 4Real Estate Market Germany

20、2025Overview of segment-specific outlook Until a few years ago,rents in the three market segments we have reviewed office,retail,and residential were increasing,but at different rates.Conversely,the current trend is much more heterogeneous,because key factors of influence have altered significantly.

21、As a result of e-commerce and the“New Work”concept,demand for office space and retail outlets has generally contracted on the one hand,while on the other hand the demand profile has altered permanently.Space needs to be attractive and sustainable.While a shift in demand is the main factor for the co

22、mmercial real estate market,demand is outpacing supply in the residential market because of immigration and demographic change.The construction crisis is restricting the supply further.Below the line,rents diverge,not only between,but to some extent also within the various market segments.Moreover,t

23、he individual real estate locations are even more heterogeneous than in the past.The top locations covered in this report are generally the best performers.Office:New Work drives up vacancies and widens the gulf between sub-markets LS:vacancy rate in%,RS:rents in EUR/m(top locations only)Retail and

24、residential:E-commerce weighs on retail rents,while rents in the strained housing market are rising dynamically each axis:rents in EUR/m(top locations only)Source:bulwiengesa Source:bulwiengesa There is no end to the negative factors for city centre retail.Although the pandemic is over,the hoped-for

25、 subsequent recovery has failed to materialize.Inflation,which surged to nearly 10 per cent about two years ago,significantly dented real incomes,forcing private households to tighten their belts.In addition to the aftermath of inflation,geopolitical flash points,climate change and the economic cris

26、is are having an unsettling effect on consumers.As a consequence,private consumption is not gaining momentum although real incomes are now very positive again.As a result,city centre rents fell again last year.However,the top locations,which are attractive for retailers,have shown an above-average p

27、erformance.Despite high rent levels,by 2024 the 16 per cent decline in prime rents from their peak levels in the top locations was much less marked than for rents in regional centres,which fell by around a quarter.The prospects for the top locations are also better.Many retailers have thinned out th

28、eir branch networks and are focusing on fewer locations.The top locations with high purchasing power,catchment areas of millions of people,and strong tourism are usually top of the list here.Combined with a revival of interest in city centre sales space,the decline in rents is likely to have been ab

29、sorbed.Prime rents should remain stable at around EUR 250 in 2025.481216202428323640441234567891011200420082012201620202024office vacancy rate(LS)office prime rent city(RS)office average rent city(RS)office average rent peripheral locations(RS)68101214161820408012016020024028032020042008201220162020

30、2024retail prime rent(LS)average residential rent first use(RS)Trend in office,retail and residential property becoming increasingly heterogeneous Retail:Top locations show strength under weak market conditions Prime rents in top locations likely to remain stable in 2025 5Real Estate Market Germany2

31、025The contraction in demand for office space as a result of the“New Work”concept and the impact of working from home(WFH)have clearly weighed on office rentals.Since 2020,relatively low take-up has been accompanied by steady growth in vacant office space.The vacancy rate has more than doubled since

32、 2019 from less than 3 to a good 7 per cent.Thanks to generally still moderate vacancy rates,rents have not fallen sharply,although trends diverge between the various market segments.Companies are seeking centrally located,modern space,which can facilitate the important communications tools needed f

33、or New Work and can also demonstrate good sustainability.However,this type of space is in short supply and rents are high because of the sharp hike in construction costs.Relocation to smaller office premises enables companies to counteract the excessive rise in the cost of space.Conversely,the suppl

34、y and demand ratio is less favourable for office locations and space which do not meet the required criteria.This is also the main area where the volume of vacant properties is increasing.Accordingly,the gulf in office rents has widened significantly.On average,prime city centre rents in the top loc

35、ations have risen steeply to nearly EUR 43 per m.Conversely,average city centre rents have increased much more slowly,and are even stagnating in peripheral areas of the office market.The economic outlook for 2025 shows few glimmers of hope,and the trend in the office market we have described is ther

36、efore likely to persist.For a long time,housing markets in the top locations have been at the top of the rent trend.However,the housing shortage originally responsible for this is now a nationwide problem in the German housing market,to which politicians have not yet found a satisfactory solution.Al

37、though the pace of rents has now reached a high level throughout the whole country,the top locations are nevertheless the frontrunners.Given the steady growth in rents over many years,absolute rent levels are extremely high here.Cold rents measured in m climbed to a good EUR 15 for re-lets in 2024,a

38、nd to nearly EUR 19 for first occupancy.The growing divergence here compared to existing rents which are only increasing slowly is particularly marked.Relocation is not an attractive option,and this is further aggravating the shortage of rented properties.The further deterioration in the crisis affe

39、cting new construction in 2024 also means that the number of apartments completed in the years ahead will be significantly lower.Rent growth in the top locations therefore looks set to continue unchecked in 2025.Overview of rent trends in top locations Retail prime rent change in%Office prime rent c

40、hange in%Multi-family average rent first use change in%10 years 2014-2024 5 years 2019-2024 2023 yoy 2024 yoy 2025e yoy 10 years 2014-2024 5 years 2019-2024 2023 yoy 2024 yoy 2025e yoy 10 years 2014-2024 5 years 2019-2024 2023 yoy 2024 yoy 2025e yoy Berlin-12,1-15,0-3,8 0,0 0 95,7 15,4 2,3 1,1 2 74,

41、3 41,7 10,5 3,7 4 Cologne-12,5-17,6-2,3-2,3 0 57,1 34,7 16,4 3,1 3 43,0 22,6 6,2 5,2 4 Dsseldorf 3,8-5,3-1,8 0,0 0 75,0 58,5 11,1 16,3 3 27,0 18,3 7,1 3,3 4 Frankfurt-10,0-13,0-3,6-1,5 0 35,7 15,9 2,2 3,3 6 42,7 16,1 1,7 5,6 5 Hamburg-14,5-17,5-5,0-1,1 0 44,1 21,7 2,4 2,3 3 34,4 22,2 5,0 4,8 5 Munic

42、h-8,6-13,9-3,2-2,6 0 61,2 36,7 4,5 16,1 3 53,7 15,7 3,8 4,1 4 Stuttgart-18,8-17,0-2,5 0,0 0 81,6 50,0 7,1 15,0 3 57,1 10,7 1,2 2,3 4 Top locations-11,2-14,8-3,6-1,0 0 63,5 27,8 4,8 7,1 3 53,5 26,2 6,5 4,1 4 Source:bulwiengesa,DZ BANK Research forecast Office:WFH and economic slowdown hit office rent

43、als Prime rents may rise further despite increase in vacant properties Residential:Housing markets in top locations characterized by housing shortage and extremely high rents 6Real Estate Market Germany2025ECONOMIC CONDITIONS IN GERMANY 2024 was a disappointing year for the German economy.Exports su

44、ffered as demand remained weak.The aftermath of the wave of inflation was very unsettling for consumers.GDP(-0.2 per cent)therefore fell for the second year in succession.No significant improvement is expected in 2025.Anticipatory effects for exports ahead of expected higher US tariffs are likely to

45、 lead to a sharper increase in GDP in the first half.However,we expect tariffs to weaken exports and investment over the year.The collapse of Germanys governing“traffic light”coalition in autumn 2025 has brought forward the Bundestag elections to February.The interim period until the new government

46、takes office means several months of political stalemate for the German economy which faces numerous problems and challenges.On the other hand,there is a chance that the new government will be able to inject fresh economic impetus with the relief measures outlined in election manifestos.German consu

47、mer prices increased again slightly more sharply at the end of 2024.Price pressure is likely to have remained elevated in January.This is mainly attributable to services,one factor being the price hike for the Deutschlandticket(for public transport within Germany),and higher insurance premiums.The C

48、O2 levy on fossil fuels also increased at the beginning of 2025,and is driving up energy costs.Price pressure is likely to weaken over the course of 2025,because slower economic growth will ease the pressure on wages.EU counter-tariffs in response to possible US tariffs could however lead to an incr

49、ease in inflation.Overall,we expect an inflation rate of 2.3 per cent in 2025 compared to 2.4 per cent in 2024.Economic weakness brings only a slight rise in unemployment LS:GDP in%vs.prev.yr.,Rs:unemployment rate in%Inflation rate broadly back in line with ECB target of 2%after rising sharply consu

50、mer price trend in per cent vs.prev.yr.(HICP)Source:Eurostat,DZ BANK Research forecast Per:February 2025 Source:Eurostat,DZ BANK Research forecast Per:February 2025 567891011-6-4-20246200620102014201820222026eGDP(LS)unemployment rate(RS)0123456789200620102014201820222026einflation rateECB targetGrow

51、th in German economy will remain weak in 2025 End of“traffic light”coalition leads to political stalemate,but early change of government creates potential for economic tailwind Services and CO2 prices likely to keep inflation slightly above ECB target in 2025 7Real Estate Market Germany2025CONSTRUCT

52、ION ACTIVITY IS SLOWING DOWN SIGNIFICANTLY A rapid hike in construction costs and interest rates is hitting the capital-intensive real estate sector.As a result of the much heavier cost burden,the construction of new residential and commercial properties barely pays off even if rents rise sharply.Ho

53、using associations in particular often lack the funds for new build projects given higher operating costs for existing housing stock and associated energy-related renovation.Despite high demand for housing and modern commercial property,this is leading to a steep decline in new building permits.The

54、number of completions is therefore expected to fall sharply in 2024 and thereafter.More than half of the construction companies active in this area report a lack of orders.Capacity utilization at construction companies has also fallen rapidly.This is having far-reaching consequences which extend bey

55、ond the supply of new properties.On the one hand,the already weak economy is suffering because new construction-which was flourishing until recently-is no longer stimulating macroeconomic growth,but is causing it to slow.On the other hand,there is a significant shortfall in public revenues.If skille

56、d workers leave the construction sector,it will also be more difficult to scale up new building again.Building permits for residential and office premises fall sharply index for building permits,2000=100 Construction costs continue to rise,but at a slower rate in 2024 construction cost index,2000=10

57、0 Source:Eurostat Source:Destatis Construction companies:Lack of orders and low capacity utilization LS:utilization in%,RS:proportion of“Yes”responses in%Capital-intensive real estate sector suffers from higher interest rates Euro-swap rates for different maturities,interest rates in%Source:ifo Inst

58、itute Source:Oxford Economics 204060801001201401601801997200020032006200920122015201820212024office buildings(usable floor space)multi-family houses(number of dwellings)801001201401601802002201997 2000 2003 2006 2009 2012 2015 2018 2021 2024010203040506050556065707580851997 2000 2003 2006 2009 2012

59、2015 2018 2021 2024capacity utilization in the construction industry(LS)building construction:companies with a lack of orders(RS)-101234567819952000200520102015202020251 year5 years10 yearsHigher construction and financing costs halt new building with far-reaching consequences for market supply,cons

60、truction companies and public coffers 8Real Estate Market Germany2025SPECIAL TOPIC:HOTEL REAL ESTATE IN GERMANY New trend-setting brands transform the hotel market Made in Germany Germanys image is closely connected with industry.Names like Bosch,Daimler,Porsche and Siemens are known globally.Howeve

61、r,Germany is also a holiday destination.Although tourism is not as important as in Italy or Spain,it still plays an important role for the economy.The tourism sector generates around 500 million overnight stays each year and a good EUR 125bn of gross value-added,as well as nearly 3 million jobs.Alth

62、ough the steady upward trend in tourism was brought to an abrupt halt by the pandemic,the sector has recovered again quickly thanks to the enthusiasm for travel in Germany and abroad.It also became evident quickly that online business meetings via teams and Webex cannot replace a personal conversati

63、on with customers or suppliers.As well as an increase in the number of overnight stays,a major shift has also taken place in the hotel business.Instead of making reservations via the Varta guide or by telephone,hotels can be easily booked on portals such as B or HRS.com and via internal company syst

64、ems based on negotiated hotel rates and travel cost guidelines.However,the hotel offer has also changed.While the number of beds has grown in line with the volume of guests,the number of hotel businesses has contracted.Fifteen years ago,a hotel had on average around 60 beds,compared to about 90 toda

65、y.Established hotel brands have also been supplemented with many hotels of a modern design,which often have a good price-performance ratio similar to B&B hotels or motels.The most widespread hotel brands in Germany are dominated by the lower(budget,economy)and medium(midscale)price segments,while,as

66、 expected,there are fewer hotels in the upper price segment(upscale).Hotel brands are also changing rapidly.While some brands reduced the number of their hotels from 2022 to 2023,others have grown strongly.The number of hotels has grown significantly,particularly in the B&B segment,at the now insolv

67、ent Achat Group,Premier Inn,Arthotel and Moxy.B&B hotels are also in the lead based on the number of businesses with 165 hotels(2023).Best Western lies in second place with 151 hotels,while Mercure is third with 94.Hotel overnight stays in 2024 will not quite reach 2019 levels overnight stays in Ger

68、many by type of business in millions Strong growth in no.of hotel beds,but fewer hotel businesses L:No.of hotels,R:No.of hotel beds in 000 Source:Destatis *incl.bed and breakfast,guest houses and inns Source:Destatis 26327228028929830716416826929430076777981879462659295972829303135363433404243585858

69、595859424450565601002003004005002014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024hotels*vacation rentalscampgroundsother1,3001,3501,4001,4501,5001,5501,6001,6501,7001,7505,0006,0007,0008,0009,00010,00011,00012,00013,00014,0002008201220162020Nov 2024hotels(LS)B&B(LS)number of beds(RS)Germany is

70、a holiday destination as well as an industrial location Hotel market growing and evolving:more beds,but fewer hotels Hotel brands evolving:B&B hotels are in the lead and are growing strongly 9Real Estate Market Germany2025Structure in the German hotel market Around 19,000 hotel businesses were opera

71、ting in Germany in 2023,compared to 21,400 in 2008.Conversely,overnight capacity increased by 25 per cent to nearly 1.7 million beds in this period.Around a third of hotels are run on a bed&breakfast basis,with no other meals provided.Concentration in the hotel market is fairly low,but is increasing

72、 due to the growing activity of hotel chains.Accor whose brands include ibis and Mercure is the company with the highest turnover.With around 340 hotels and approximately 47,000 beds,this represents a proportion of 3 per cent of total overnight capacity.The 25 leading hotel brands,which have approxi

73、mately 1,300 beds,account for around 7 per cent of all hotel business.While private visitors account for the lions share of overnight stays in tourist regions,business travel plays a much more significant role for the hotel business in large cities.Various contract structures can be used to operate

74、hotels.One option is letting the property.However,the most common method in Germany is leasing to the hotel operator.Here the hotel property,with furniture and fixtures,is provided as a largely ready-to-operate hotel.Contracts are mainly long-term(ten or more years)with an extension option.The opera

75、tor bears the risk of the hotel operation.In contrast to other countries,management contracts play a less important role in Germany.Here the operator is paid a fee by the property owner to run the hotel.Hybrid contract structures consisting of a combination of leasing and management contracts are be

76、coming increasingly common,for example in the form of a revenue or performance-based lease.These enable the potential,risks and co-determination rights to be split between the property owners and operators within the hotel business.This means that investors can arrange their participation in the hot

77、el business based on their market expertise.Leading hotel brands in Germany(2023)Rank Brand Brand owner Segment Number of hotels 2023 Number of hotels 2022 Change 2023 vs.2022 1 B&B Hotels B&B Hotels Budget 165 151+14 2 Best Western BWH Hotel Group Central Europe Midscale 151 154-3 3 Mercure Accor M

78、idscale 94 98-4 4 Ibis Accor Economy 81 84-3 5 Ibis Budget Accor Budget 74 75-1 6 Motel One Motel One Economy 59 56+3 7 Leonardo Fattal Hotel Management Midscale 56 54+2 8 Holiday Inn Express InterContinental Hotels Group Economy 52 46+6 9 NH NH Hotel Group Midscale 50 53-3 10 Premier Inn Premier In

79、n Hotels Economy 47 36+11 11 Achat Achat Hotel-und Immobilienbetriebsg.Midscale 45 31+14 12 Dorint Hotels&Resorts Dorint Upscale 42 42 0 13 IntercityHotel Deutsche Hospitality Midscale 40 38 2 14 Ibis Styles Accor Economy 38 41-3 15 Novum Novum Hospitality Indifferent 38 43-5 16 The Niu Novum Hospit

80、ality Economy 35 31+4 17 Dormero Dormero Hotel Midscale 30 28+2 18 Holiday Inn InterContinental Hotels Group Midscale 29 30-1 19 Arthotel Gergeous Smiling Hotels Midscale 28 21+7 20 Moxy Marriott International Economy 28 22+6 21 Trip Inn Trip Inn Management&Service Indifferent 27 26+1 22 A&O Hotels

81、and Hostels&O Hotels and Hostels Holding Low Budget 25 25 0 23 H+Hotels H Hotels Midscale 25 25 0 24 Maritim Maritim Hotelgesellschaft Upscale 24 24 0 25 Steigenberger Hotels&Resorts Deutsche Hospitality Upscale 24 25-1 Source:PKF hospitality Germany has 19,000 hotel businesses with a total of 1.7m

82、beds Hotel market dominated by leasing contracts leases can be fixed or performance-related 10Real Estate Market Germany2025Franchising is an extension of the leasing relationship.Well-known hotel chains are gaining ground,particularly in cities.The hotel business benefits from the appeal of the hot

83、el brand and its marketing expertise,an integrated booking system and centralized purchasing.There is the additional advantage of a comprehensive business concept with standards relating to fixtures and furnishings and the design of the hotel as well as established processes.In order to participate,

84、the operator concludes a franchise agreement with the respective hotel chain.By using the franchise model and an operator,hotel chains also avoid signing leasing agreements at unfavourable balance sheet terms.Trend in hotel market:Costs rising faster than revenue The upward trend in overnight figure

85、s,strong revenue growth and the increasing importance of holiday travel within Germany signal a positive trend in the hotel market.This impression is strengthened further by significant hikes in room prices for hotel bookings.However,market conditions for hotel businesses remain challenging.This is

86、borne out by the insolvencies of the Achat Group in November 2024,followed by Lindner Hotels a few weeks later.There have also been insolvencies in the portfolio of hotel operator RIMC,which runs the new Hamburger“Bunker hotel”.The reasons for this are the post-pandemic staff shortage and high cost

87、increases.From 2022 to 2024 staff costs increased by more than 30 per cent.Contributory factors are negotiated wage agreements,but also the higher minimum wage,which increased from EUR 9.82 per hour(2022)to EUR 12.41(2024).At the beginning of 2025 the minimum wage was raised by a further 41 cents pe

88、r hour.However,much higher food and energy prices are also weighing on hotel operators.Ranking of hotel companies in Germany based on revenue(2023)Rank Hotel company Net revenue in EUR m Number of businesses Number of rooms Room occupancy in%Net room price in EUR Revenue per room in 000 EUR 1 AccorH

89、otels 1,430,0 336 47,181-30.3 2 Marriott International 1,013,3 113 24,218 63 151 41.8 3 Intercontinental Hotels Group 933 96 18,623-50.1 4 Best Western Hotels 727 187 20,074 66 86 36.2 5 GCH Hotels Group 559-6 Motel One 552 62 17,930 71 104 30.8 7 H-Hotels 547-8 Steigenberger Hotels 515-9 HR Group 4

90、95 113 17,558 61 101 28.2 10 Hilton 455-11 Event Hotels 453-12 Dorint Hospitality&Innovation 391 55 9,398 60 125 41.6 13 B&B Hotels 385 182 19,384 66 80 19.8 14 Maritim Hotelgesellschaft 377 25 7,645 68 120 49.3 15 Novum Hospitality 372 118 15,959 70 81 23.3 16 NH Central Europe 346 52 10,227-33.8 1

91、7 Radisson Hotel Group 316-18 Leonardo Hotels 311 56 10,107 76 106 30.8 19 Center Parcs 235 6-77 183-20 Kempinski 206-21 Premier Inn 202 53 9,567-21.1 22 Hyatt Hotels Corporation 191-23 Meli Hotels 172 24 4,341 63 135 39.7 24 DSR Hotel Holding 171 14 2,145 69 184 79.5 25 Lindner Hotels 167 23 1,496

92、59 127 111.7 Source:ahgz From franchising to hotel brand:hotel chains gaining ground Staff,food and energy costs have risen faster than revenue 11Real Estate Market Germany2025 Overnight revenues stagnating in real terms for about 10 years revenues of hotels and guesthouses,2015=100 Room prices and

93、capacity utilization both picking up LS:in EUR,R:in%(in each case throughout Germany)Source:Destatis Source:ahgz/CoStar Many hoteliers are also complaining about bureaucracy.On closer inspection,revenue figures are also stagnating.Although hotel revenues(excl.B&B hotels)have risen by 12 per cent to

94、EUR 24bn since 2019,this growth is essentially attributable to price increases.Adjusted for inflation,revenues of hotels and guesthouses are currently at around 2015 levels.Although revenue did grow sharply when the hotel business resumed post-pandemic,it has been stagnating in real terms since the

95、beginning of 2023.Market trend top-7 locations Hotels in top locations are facing the same challenges as the sector as a whole.However,these hotels are benefiting from a particularly strong recovery in guest numbers.As in some other large cities,the European Football Championship had a positive impa

96、ct here too.Room demand was also boosted by events featuring international megastars such as Taylor Swift,Adele and Coldplay,the main positive impact of which will be reflected in figures for the second half of 2024.However,the hotel business was already performing very well in the first half of 202

97、4 year-on-year.Both capacity utilization of hotel rooms and room prices grew consistently,and revenue per room increased in all the top locations.B&B hotels,which include successful budget/economy hotels,performed particularly well.B&Bs(budget/economy hotels)performed better beds/overnight stays,201

98、0=100(top locations)Broadly parallel growth in beds and overnight stays change from 2010 to 2023 in%Source:bulwiengesa Source:bulwiengesa 304050607080901001101201301402015 2016 2017 2018 2019 2020 2021 2022 2023 2024nominalreal20304050607080020406080100120201920202021202220232024average daily rate(L

99、S)revenue per available room(LS)occupancy rate(RS)80100120140160180200hotel bedshotel nightsB&B bedsB&B nights2010201920230102030405060708090BerlinDssel-dorfFrank-furtHam-burgCologne MunichStutt-garthotel/B&B bedshotel/B&B nightsPrice hikes associated with stagnating real revenue figures Hotel busin

100、ess in large cities boosted by 2024 European Football Championship and international megastars 12Real Estate Market Germany2025 Major differences in room occupancy rates in top locations room occupancy,in%All top locations reported increasing revenue per room in 2024 prices and revenue per room,in E

101、UR(resp.for the first half)Source:ahgz/CoStar Source:ahgz/CoStar *)RevPAR=revenue per available room However,the tourism boom in large cities has also driven forward a whole series of hotel projects,and the number of hotel beds has therefore continued to increase in recent years.The expansion of ove

102、rnight capacity has essentially moved in parallel to the increase in overnight figures.The hotel offer is not nevertheless expected to continue to grow.Virtually no new hotels are likely to be added in the coming years given the steep downturn in project development.However,the previous upward trend

103、 in overnight stays could also suffer a setback.The continuing economic slowdown and weakness in important sectors of industry may brake travel activity as company costs are squeezed and labour market conditions worsen.Travellers might also increasingly opt for low-cost options partly because hotel

104、prices are rising anyway.Investment market Investments in German hotel real estate have plummeted due to the pandemic.However,the subsequent rise in interest rates and capital market yields did not lead to a further decline in the investment volume.The peak yield has increased by a good 150 basis po

105、ints since 2019.However,investment has failed to recover so far.Hotel investment market has not picked up again so far LS:investment volume in EUR bn;RS:yield in%Source:CBRE 505560657075BerlinDssel-dorfFrank-furtHam-burgCologne MunichStutt-gartoccupancy H1 2023occupancy H1 20245060708090100110120130

106、140BerlinDssel-dorfFrank-furtHam-burgCologne MunichStutt-gartaverage daily rate H1 2023average daily rate H1 2024RevPAR*H1 2023RevPAR*H1 20243.54.04.55.05.56.06.501234562010201220142016201820202022Q32024hotel investments(LS)prime yield with lease contract(RS)Hotel capacity and overnight figures grow

107、 more or less in parallel Economic downturn could slow down the travel market Hotel investment slumped in the pandemic 13Real Estate Market Germany2025As in the previous year,the figure is likely to be EUR 1.5bn in 2024.The 60 or so transactions reported by CBRE up to the third quarter of 2024 had a

108、n average size of EUR 17m.Most of the transactions were in the value-added segment.Hotels and temporary housing are both of interest to investors.There is a positive trend in both tourism and demand for temporary housing concepts,which are not subject to the regulatory restrictions which apply to or

109、dinary apartments.Hotel concepts also provide potential for the conversion of existing properties,e.g.for office buildings which do not meet current criteria for office tenants,but which are not old enough to demolish.This gives hotel chains access to properties in preferred locations without the ne

110、ed for expensive and uneconomic new construction.Investor interest is likely to focus on top locations and other large cities with high volumes of tourists and business travellers and many long-distance commuters.Current trends in the hotel business The shift taking place in the hotel market,with a

111、growing differentiation of hotel brands from modern budget concepts to trendy boutique hotels,is likely to continue.Hotel chains are developing new brands to meet changing customer demands,with design and offer geared to specific target groups,for example by providing a vegan breakfast,bike rental o

112、r a hotel bar.Within the brands,hotels are sometimes relocated to other more attractive premises in the particular location.The“regeneration”of the hotel offer with modernized properties and new brands is likely to lead to a further contraction in the number of hotel businesses.Traditional,family-ru

113、n businesses in particular are in retreat.They often lack the access to capital needed for investment.Nor do they benefit from the cost advantages enjoyed by chains.The supply of overnight accommodation is also shifting towards new concepts for serviced apartments a segment of the hotel market which

114、 is likely to continue to grow.This type of accommodation differs from a classic hotel by virtue of its larger bedrooms,limited provision of services(essentially room cleaning)and is geared to longer stays.The labour shortage and rising wages have less impact here because fewer staff are needed.Othe

115、r developments are sustainable business concepts and similar to retail,and bars and restaurants a staff shortage and a cost squeeze.One approach is to extend digitalization,with increasing use of mobile check-in and digital keys,although this can have an impersonal effect on the guest and its use is

116、 therefore limited.Employee loyalty and attractive working conditions are important,particularly given the antisocial hours worked in the hotel business.A high degree of flexibility and adaptability is important for hoteliers and hotel chains in a challenging market environment.Hotel properties are

117、likely to continue to show a comparatively stable performance based on robust demand for overnight accommodation,investor interest in the asset class and the meagre supply of new-build properties.Boundaries between hotels and temporary housing are fluid Young lifestyle hotel brands in the ascendancy

118、 Less staff needed for serviced apartments Conditions remain challenging:Need for flexibility and adaptability 14Real Estate Market Germany2025TURNAROUND IN REAL ESTATE INVESTMENT?Investment volume picks up again at low level at end of 2024 real estate investment volume in EUR bn Some segments of as

119、set classes show marked shift over time proportion of total real estate investment in%Source:CBRE Source:CBRE The marked rise in capital market yields,the shift in demand caused by home working and online shopping,and not least the ongoing weakness of the German economy,have clearly left their mark

120、on real estate investment.In addition to significantly lower investment volume,there has been a major shift in the market shares of the various asset classes.Offices,which long dominated,now lag behind residential and logistics premises,while retail has picked up again slightly.However,there are now

121、 signs of the trend reversing towards a market recovery.The visible recovery in real estate investment in the last quarter of 2024 was partly attributable to the further decline in interest rates.As a result of the downward inflation trend,the ECB is gradually cutting interest rates again after ten

122、successive hikes.Below the line,real estate investment increased to EUR 34bn in 2024 compared to EUR 28bn in the previous year.Rental yields have stabilized at a much higher level.Valuation corrections have also come to an end.Prices of multi-occupancy homes are even increasing again.However,valuati

123、ons diverge very widely.Despite the correction,and in contrast to retail properties,offices,and particularly multi-occupancy homes are much more expensive today than in 2010.Rental yields stabilize after increasing sharply initial rental yields and bond yields,in%Valuation correction in real estate

124、market clearly at an end real estate prices,in%yoy Source:bulwiengesa,Macrobond Source:vdp 0510152025303540455055Q12018Q12019Q12020Q12021Q12022Q12023Q12024commercial real estateresidential(transactions 50 units)010203040502018201920202021202220232024residentialofficeretaillogisticshotelother-1012345

125、678200820102012201420162018202020222024Federal bonds 10Yofficelogisticsretail-12-9-6-303691220172018201920202021202220232024residentialcommercialMajor shift in climate for real estate investment Real estate market shows gradual recovery Asset class valuations diverge widely 15Real Estate Market Germ

126、any2025In the seven top locations,the correction has been particularly marked for offices and multi-occupancy homes,and the yield divergence has narrowed compared to regio-nal centres.The initial rental yield for premium office properties in the top-7 has in-creased from 2.7 per cent(2021)to 4.5 per

127、 cent,which is around half a per centage point higher than for high-value retail properties.The average rent multiplier pur-chase price based on net annual rental income for multi-occupancy homes in the top locations has declined sharply from 34(2022)to 24(2024).However,the redu-ced level is still n

128、ot low,since rent multiplier figures were less than 16 before 2010.Retail:Trend in initial rental yield net initial yield in central retail locations,in%Retail:Yield trend for individual top locations net initial yield in central retail locations in%Office:Trend in initial rental yield net initial y

129、ield in central office locations,in%Office:Yield trend for individual top locations net initial yield in central office locations in%Residential:Rent multiplier for multi-occupancy homes average rent multiplier Rent multiplier for individual top locations average rent multiplier Source:bulwiengesa E

130、xplanation:the net initial yield for office/retail is calculated from the annual net rent and the total purchase price taking account of additional costs.For the multi-occupancy multiplier,the purchase price is divided by the cold rent in the first year and thus corresponds to the reciprocal value o

131、f the gross initial yield.Top-7:Index of the top locations(Berlin,Cologne,Dsseldorf,Frankfurt,Hamburg,Munich and Stuttgart)Regional-12:Index of the regional centres(Augsburg,Bremen,Darmstadt,Dresden,Essen,Hannover,Karlsruhe,Leipzig,Mainz,Mannheim,Mnster and Nuremberg)2.53.03.54.04.55.05.56.06.57.020

132、04 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024top locationsregional property centres2.53.03.54.04.55.05.5200820102012201420162018202020222024BerlinDsseldorfFrankfurtHamburgCologneMunichStuttgart2.53.03.54.04.55.05.56.06.57.02004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024top locationsreg

133、ional property centres2.02.53.03.54.04.55.05.56.0200820102012201420162018202020222024BerlinDsseldorfFrankfurtHamburgCologneMunichStuttgart10141822263034382004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024top locationsregional property centres1015202530354045200820102012201420162018202020222024Be

134、rlinDsseldorfFrankfurtHamburgCologneMunichStuttgartOffices and multi-occupancy family homes undergo a sharp correction in top locations 16Real Estate Market Germany2025RETAIL PROPERTIES Germans still reluctant to shop The Covid pandemic is no longer having an adverse impact on the retail sector.Howe

135、ver,the hoped-for strong recovery in city centre retail has failed to materialize.Inflation which surged to nearly 10 per cent about two years ago led to a visible decline in real incomes,forcing private households to tighten their belts.The after-effects are still being felt.Geopolitical flashpoint

136、s,climate change,the ongoing economic crisis,and job losses in industry are also continuing to have an unsettling effect.Consequently,private consumption is not gaining momentum despite the fact that real incomes are very positive again.The increase in the savings rate to a high level shows that hou

137、seholds are opting to hold on to their money.This is a major cause of concern for the retail sector.In this years HDE economic barometer,consumer restraint is the main issue facing retailers.Trade only appears to be growing because rising prices are eroding the increase in sales retail sales,in%yoy

138、Concerns about the future reflected in historically relatively high savings rate savings rate,in%Source:HDE,Eurostat Source:Destatis However,the weakness of the retail sector is not immediately evident,since sales have grown strongly in recent years.Growth has nevertheless been solely attributable t

139、o rising prices,while sales have fallen in real terms.The sharp fall in inflation towards the ECBs two per cent target has at least halted the real decline in sales,albeit only for the retail sector as a whole.Consumer restraint is having a bigger impact in city centres.Because households can make o

140、nly limited savings on everyday necessities and are reluctant to stop travelling,the impact is greater for city centre retail,already weakened by e-commerce.This is reflected in textile sales which have clearly underperformed the retail sector as a whole.Booming low-cost suppliers from China such as

141、 Temu and Shein are making life even more difficult for retailers.They use their large advertising budgets and finely tuned social media presence on platforms such as TikTok to attract mainly younger consumers.They also benefit when budgets are tight with their cheap products.Their success is clearl

142、y not diminished by a lack of consumer protection and often low product quality.Instead of focusing on sustainability,customers are being directed towards“throwaway consumption”.Although embattled fashion retailers gained ground slightly in 2024,conditions remain strained.On the one hand,fashion sal

143、es are still down by around 10 per cent from their 2015 level.On the other hand,low sales are being compounded by rising-4-3-2-101234567200020052010201520202025enominalreal11.6891011121314151617200420082012201620202024savings rateaverage from 2004 to 2019First inflation,now economic crisis:No post-p

144、andemic recovery in city centre retail Weak consumption particularly bad news for city centre retail New competition from Chinese low-cost shippers No end to insolvencies:Conditions remain precarious in fashion retail despite sales growth 17Real Estate Market Germany2025energy and personnel costs,an

145、d higher,inflation-indexed rents.However,sales of furniture and home accessories are also suffering.This is leading to a seemingly unending wave of insolvencies among chain stores.In 2024 these included well-known names such as Depot,Esprit,Scotch&Soda,Sinn and Sr.After 2008,2016 and 2020,this was a

146、lready the fourth insolvency at Sinn.The result is often branch closures or even the cessation of business operations.The Galeria retail group also closed branches under its third set of insolvency proceedings in mid-2024.Expenditure on fashion and shoes falls proportion of private consumer spending

147、,in%Less shopping=less sales space:No.of German shopping centres and sales space contracted for the first time in 2024 LS:number of shopping centres,RS:space in million m Source:HDE/Destatis Source:EHI Retail Institute Repeated insolvencies underpin the continuing weakness of city centre retail,part

148、ly because e-commerce is having a particularly marked impact here.The volume of sales space has nevertheless continued to increase,although the pace has slowed.However,the development of new space has not come to a complete halt.Another shopping behemoth will be added in 2025 with the delayed openin

149、g of the Hamburg HafenCity mall.Sixty years after the opening of the first German shopping centre-the Main-Taunus centre near Frankfurt-the number of centres and the volume of sales space in them declined for the first time in 2024.In addition to shopping centres which have been“withdrawn from the m

150、arket”,city centre sales space is also contracting.One contributory factor is mixed use concepts for unoccupied department store premises.Because new city centre sales space continued to be developed in the past,there is a correspondingly wider divergence between the volumes of sales space needed an

151、d available.There is a significant need for repurposing.According to analysis by Savills,the vacancy rate in shopping centres has more than doubled since 2019 from around 4 to 9 per cent.Similar to city centres,the extent varies.This is also reflected in the Savills report.Sixty per cent of shopping

152、 centres have relatively low vacancy rates of less than 10 per cent.For more than a quarter of them,the figure remains moderate at 10 to 20 per cent.The situation is more difficult for almost a fifth of the centres,which report vacancy rates of more than 20 per cent.In addition to the current consum

153、er slowdown and ongoing weakness in fashion retail,the construction crisis could also have an adverse impact in some city centres.Many projects have been at least temporarily mothballed by the insolvency of large project developers such as Signa,Centrum and Gerchgroup.A potentially more prolonged ha

154、lt to large developments in prominent city centre locations may have a negative knock-on impact on the surrounding area.4.64.44.44.13.83.710.310.211.711.611.111.135791113201820192020202120222023fashion/shoesfood and nonalcoholic beverages11121314151617183503754004254504755005252006 2008 2010 2012 20

155、14 2016 2018 2020 2022 2024number of shopping centers(LS)retail space(RS)in 2023,the definition of shopping centers was adjusted.No.of German shopping centres contracted for the first time in 2024 Vacancy rates up everywhere,but local pressure for action differs City centres could be adversely affec

156、ted by stalled building projects as developers go bust 18Real Estate Market Germany2025Market conditions for retail In 2023,retail sales increased by 3 per cent in nominal terms,but fell by the same amount in real terms due to strong price increases.The result was better in 2024.Although the nominal

157、 increase was weaker at 2.2 per cent to 664 billion euros,it also rose slightly in real terms by a good 1 per cent due to significantly weaker inflation.The HDE forecast for 2025 is characterized by the gloomy economic outlook and subdued consumer sentiment.According to this forecast,nominal growth

158、of 2 per cent will be roughly on a par with 2024,but the real increase in sales will be halved to 0.5 per cent compared to the previous year.After a long boom,online retail is currently barely gaining market share LS:retail sales in EUR bn,RS:share in%The negative impact on retail of a rapid rise in

159、 consumer prices is over,but inflation continues to pose a risk consumer prices in%yoy(January 2025)Source:HDE Source:Eurostat *)excl.energy and food In contrast to previous years,conditions for online retail have not improved significantly either.The high sales growth of the past,which led to a cle

160、ar increase in market share,has not been evident since 2022.Since then,the e-commerce market share has remained very stable at just over 13 per cent.However,the proportion varies considerably depending on the product group.For food,which accounts for a third of sales,the figure is a low 3 per cent.C

161、onversely,the average for non-food products is nearly 20 per cent.Online sales account for a much larger proportion of around 40 per cent in the core city centre retail segments of fashion,shoes and electronics.Consumer restraint in recent years has been attributable to a significant,inflation-drive

162、n loss of purchasing power.However,since mid-2023,the previously negative trend in real wages has turned positive again as a result of falling inflation combined with strong wage agreements.In 2024,real wages are likely to have increased on average by more than 3 per cent,considerably boosting the p

163、urchasing power of private households.This has nevertheless had little benefit in terms of consumer confidence in a climate overshadowed by crises.The GfK consumer climate index has moved some distance away from its previous low reading,but remains at a comparatively low level.0246810121416300350400

164、450500550600650700200020052010201520202025eonline retail sales(LS)brick and mortar retail sales(LS)online retail sales as a ratio of total retail sales(RS)-101234567891011201020132016201920222025overall inflation ratecore inflation rate*2024 was not a good year,but at least retail sales were positiv

165、e again in real terms Online share stagnating since 2022 at just over 13 per cent Positive income growth does little to improve consumer sentiment 19Real Estate Market Germany2025 Consumer sentiment dented by weak consumer climate and many crisis flash points consumer climate in points(February 2025

166、)Household finances improving again:real wages,negative for the most part since 2020,picked up strongly in 2024 in%yoy Source:GfK Source:Destatis Conditions in city centres would be even more difficult if visitor numbers and footfall had not recovered so well after the pandemic.Urban tourism,which h

167、as been growing for many years,and has made a significant contribution to city centre retail,has almost regained its high level of 2019.Footfall in shopping streets is essentially back at its previous level.People still enjoy coming into city centres.This is positive,although spending is lower than

168、in the past.If customers were not visiting city centres,the outlook for the retail sector would be even gloomier.The weak trend in city centre retail has clearly weighed heavily on prime retail rents.Sales lost to e-commerce are associated with less demand for sales space,which is reflected in thinn

169、ed-out branch networks.However,retail is not only suffering from weak sales,but also from a sharp hike in costs,which further restricts the scope for rent payments.Although all the cities are feeling the negative impact of e-commerce,the pandemic,inflation and consumer restraint,the extent of the de

170、cline in rents varies widely.The downward trend in rents had already started before the pandemic and then accelerated.Depending on the location,rents fell from their maximum levels in a range of a few per cent to a halving.Tourism in Berlin and Hamburg recovers after pandemic overnight stays in mill

171、ions,annualized Footfall in shopping streets has also recovered well index of footfall(2019=100)Source:Destatis Source:Hystreet/Destatis *)average of 21 shopping streets -50-40-30-20-1001020200520092013201720212025-8-6-4-2024681020082012201620202024consumer pricesnominal wagesreal wages2468101214161

172、8205101520253035401994199920042009201420192024Berlin(LS)Hamburg RS)0204060801001201401602019202020212022202320242025footfall 30 days average*level of 2019Tourism and footfall recover strongly Headwind for city centre retail weighs on rents 20Real Estate Market Germany2025Retail:Comparison of top loc

173、ations The seven top locations reviewed in this market report have generally performed best overall in terms of retail rents.By 2024,rents had fallen by an average of-16 per cent from their peak levels compared to-24 per cent in other regional centres.However,they had also increased much faster in t

174、he top locations in the previous period,with prime city centre rents up by more than 30 per cent from 2004 to 2024,compared to a decline of nearly 10 per cent in regional centres.Comparatively positive rent trend in top locations LS:prime rents in%yoy,RS:index 2004=100 Despite weak retail,city centr

175、e space rentals have not declined further L:Take-up in 000 m,R:Share in%Source:bulwiengesa Source:JLL The relative strength of the seven largest cities as retail locations is based on various factors.These include large catchment areas of several million people,strong demographic growth,above-averag

176、e purchasing power with the exception of Berlin and a large volume of visitors from Germany and abroad.However,from the retailers perspective,other aspects speak for the top locations.Because of their market size and internationality,they are well placed to test new concepts and to act as a“gateway”

177、for suppliers who have not previously had a high street presence in Germany.The risk of city centre depopulation which affects smaller cities is not a factor here.The cities which rank below the top locations are also more interchangeable from a retail perspective.If branch networks are thinned out,

178、the top locations will be less impacted because of their attractive features.The continuing headwind for city-centre retail does not mean that there is little interest in retail space.According to data from BNP Paribas Real Estate,just over 500,000 m of space was leased in German city centres in 202

179、4.Although this figure does not quite reach the floor space turnover of at least 600,000 m until 2019,it is visibly higher than the figures for 2020 to 2023.The highest figure was reached in 2014 with just over 1 million m.According to JLL figures,just over half of the space leased in 2024 was in sh

180、ops larger than 1,000 m.This category is particularly in demand due to the consolidation of branch networks,but there is hardly any available space in good locations and of good quality.In terms of use,the largest share of rented space was attributable to the textile trade(37 per cent),followed by g

181、astronomy/food(18 per cent)and health/beauty(9 per cent).In the textile trade,the“young fashion”segment in particular showed expansive tendencies.90100110120130140150160170-8-6-4-202468200420082012201620202024change regional centres(LS)change top locations(LS)index regional centres(RS)index top loca

182、tions(RS)14161820222426283032343601002003004005006007008009001,0001,1002013 1415161718192021222324Germany(LS)thereof top locations(LS)share of top locations(RS)Top locations absorb negative factors for retail comparatively well Top locations offer the best conditions for retailers Despite weak retai

183、l,demand for sales space was buoyant in 2024 21Real Estate Market Germany2025 After falling sharply,prime retail rents are now stagnating prime retail rents in EUR per m Retail rents in top locations based on city centre locations retail rents in EUR per m Source:bulwiengesa Source:bulwiengesa In vi

184、ew of the large number of store closures,the supply for prospective tenants is quite good.Although the availability rate calculated by JLL fell slightly from the 2022 maximum of 17 per cent,at 15 per cent it was on average for the nine largest retail locations in 2024 well over double the 2019 figur

185、e.The largest supply of space was in Hanover at 33 per cent.The lowest rate of available retail space was in Dsseldorf,at 6 per cent.In terms of the number of shops,Cologne had the highest proportion(20 per cent),with Frankfurt at the other end of the scale(9 per cent).The volume of rented sales spa

186、ce in 2024 was broadly in line with previous years.Rented space in the seven top locations combined accounts for around a quarter of the total German market.The trend in prime rents was also mainly stable,and showed virtually no decline over the course of 2024.Prime rents range from EUR 190 per m in

187、 Stuttgart up to just under EUR 300 in Munich.Rents for prime retail space averaged around EUR 250 per m.The decline in rents in 2024 from their peak levels clearly diverges from the average figure of 16 per cent.While prime rents fell by only 5 per cent in Dsseldorf,they declined by 22 per cent in

188、Stuttgart.Voting with their feet:The Top 15 German shopping streets are in the top locations peak footfall per hour(2024)Apart from Berlin,all top locations benefit from high purchasing power purchasing power,figures in points(2024)Source:BNP Paribas Real Estate Source:bulwiengesa 180200220240260280

189、300320340360200820102012201420162018202020222024BerlinDusseldorfFrankfurtHamburgCologneMunichStuttgart04080120160200240280320200420082012201620202024prime rent 1Alocationsaverage rent1A locationsprime rent 1Blocationsprime rentperipherallocations04,0008,00012,000 16,000Flinger Strae(Dsseldorf)Theati

190、nerstrae(Munich)Spitaler Strae(Hamburg)Hohe Strae(Cologne)Schadowstrae(Dsseldorf)Mnckebergstrae(Hamburg)Georgstrae(Hannover)Tauentzienstrae(Berlin)Westenhellweg(Dortmund)Petersstrae(Leipzig)Knigstrae(Stuttgart)Schildergasse(Cologne)Zeil(Frankfurt)Neuhauser Strae(Munich)Kaufingerstrae(Mnchen)80901001

191、10120130140BerlinDussel-dorfFrank-furtHam-burgCologne MunichStutt-gartpurchasing powerfederal averageSpace availability down slightly,but remains very high Rental business very stable compared to 2023 based on take-up and rents 22Real Estate Market Germany2025The already mentioned retail advantages

192、enjoyed by the top locations are underpinned by the very high footfall in shopping streets there.Although not every visitor will spend money,the large volume of potential customers increases the probability of a sale.Another supporting factor is that visitors to the top locations tend to have greate

193、r financial scope than elsewhere.One aspect is above-average-and in Dsseldorf and Munich massively high-purchasing power.The reference level for Germany as a whole is undercut only in Berlin.City tourists also play a part here since anyone who embarks on an expensive weekend trip is usually not shor

194、t of cash.Outlook:Conditions remain weak At the beginning of the year the outlook for the retail sector had improved somewhat.Falling inflation,strong wage growth and an economic revival in the second half of 2024 raised hopes of an upturn in business.However,these hopes were dashed,despite greater

195、scope for consumption due to very positive real incomes.The economic crisis has taken hold and increased fears of job losses.Under crisis conditions,households are holding onto their money as reflected in a significantly higher savings rate.While sales have shown virtually no growth,retailers are ca

196、rrying the added burden of rising wages and social security contributions,and expensive energy.The situation is being compounded by increasing bureaucracy and a growing skills shortage.Competition from cheap Chinese goods is also increasing.The number of insolvencies could therefore continue to grow

197、.In 2022,Creditreform recorded 50 insolvencies out of 10,000 companies.In 2023 the figure rose to 61,and to more than 70 in 2024.However,the fact that people still enjoy spending time in city centres is positive.A city centre stroll is one of the most popular leisure activities.However,retailers wil

198、l have to work harder to provide new shopping experiences and more convenient shopping to encourage customers to buy.The sector will also have to adapt to evolving customer structures as society becomes increasingly diverse and ages.Cost efficiency is another factor in success.Retailers from within

199、Germany and abroad will focus on attractive locations,including the seven largest cities in particular.It is still fairly easy to rent retail space in these cities,provided it meets retail criteria,supports experience-oriented shopping and is ESG-compliant.However,higher prime rents are unlikely to

200、be realized under weak conditions.At best,rents will not fall any further in 2025.Top locations ahead in terms of footfall Retailers hopes of better business have been dashed Sales largely stagnating,as costs rise sharply and bureaucracy increases Retail sector will have to adapt to an increasingly

201、diverse,and ageing population Top locations benefit as retailers focus on attractive sites 23Real Estate Market Germany2025Overview of top locations Retail space in Berlin Prime retail rents in EUR per m Retail rents based on location in Berlin in EUR per m Source:bulwiengesa Source:bulwiengesa The

202、retail sector has been a clear beneficiary of the upturn in Berlin.The main contributory factors are a sharp decline in unemployment and the major expansion of customer potential as the population has grown,as well as flourishing tourism.With more than 30 million overnight stays each year,visitors p

203、lay a particularly important role for city centre retail because regional purchasing power is low.With demographic growth having boosted the population of Greater Berlin to more than 5 million,the sector has the largest catchment area among the German cities.Apart from its size,the Berlin retail sec

204、tor can boast of several geographically distinct prime locations.These include Tauentzienstrae,which has the highest prime rents,Kudamm,Alexanderplatz with its high footfall,Friedrichstrae,and the on-trend Hackescher Markt.However,with the number of potential customers growing,there is overcapacity.

205、This is reflected inter alia in the increase in the number of shopping centres to around 70,the most prominent of which is the large Mall of Berlin.One example of the consolidation process was the closure in 2024 of the French luxury store Galeries Lafayette which opened in 1996.A number of centres

206、and former department stores are also being repurposed.Prime rents have fallen by around 18 per cent from their peak levels to EUR 255 per m.However,rents have remained stable since the end of 2022.Below the line,the prospects are nevertheless good for retail in the attractive capital.The Berlin Sen

207、ate plans to invest more than half a million euro to support the retail sector.Space rental in city centre locations in 000 m Trend in tourism number of overnight stays per 1,000 inhabitants Source:BNP Paribas Real Estate Source:bulwiengesa 0408012016020024028032020042007201020132016201920222025eBer

208、lintop-704080120160200240280320200420082012201620202024retail prime rentaverage rent high streetmaximum rent secondary locationsmaximum rent peripheral locations0408012016020024001020304050602013 1415161718192021222324Berlin(LS)top locations(RS)01,0002,0003,0004,0005,0006,0007,0008,0009,00010,000200

209、320072011201520192023Berlintop-7Need to consolidate excess space supply even in Germanys leading shopping location 24Real Estate Market Germany2025Retail space in Cologne Prime retail rents in EUR per m Retail rents based on location in Cologne in EUR per m Source:bulwiengesa Source:bulwiengesa Colo

210、gne,with its population of one million,is the second top location in west Germany after Dsseldorf,which gives rise to a certain amount of competition.A catchment area of more than 2.5 million potential customers and a large volume of day-trippers from the Benelux countries make the city attractive f

211、or retailers.However,purchasing power is not overly high.In contrast to Dsseldorfs distinctive luxury segment,Cologne city centre is geared more strongly to mainstream retail.Although not particularly attractive visually,it offers retailers a three-kilometre shopping route with high footfall.First a

212、nd foremost is Schildergasse where many chain store branches are located.The P&C Weltstadthaus here is to be enhanced with a 50 metre high mixed-use high-rise building on the neighbouring site.Footfall is also high on Hohe Strae,although the quality of stay in the narrow street is low and the small

213、scale post-war buildings are less attractive to fashion chains.However,a number of modernization projects should improve the tenant structure which currently consists of cheap fashion and food outlets.Conspicuous vacant properties are mainly a result of building projects.Ehrenstrae is an on-trend ar

214、ea which has benefited from conversion to a pedestrian zone.A smaller luxury segment has become established in the Domkloster/Wallrafplatz area.Prime rents have fallen by 18 per cent from their peak to EUR 210 per m.The upgrading of the city centre with the Laurenz Carr which is under construction i

215、n the vicinity of the cathedral is no longer at risk,after HanseMerkur took the project over from the insolvent Gerchgroup.Space rental in city centre locations in 000 m Trend in tourism number of overnight stays per 1,000 inhabitants Source:BNP Paribas Real Estate Source:bulwiengesa 040801201602002

216、4028032020042007201020132016201920222025eColognetop-704080120160200240280200420082012201620202024retail prime rentaverage rent high streetmaximum rent secondary locationsmaximum rent peripheral locations040801201602002400612182430362013 1415161718192021222324Cologne (LS)top locations(RS)01,0002,0003

217、,0004,0005,0006,0007,0008,0009,00010,000200320072011201520192023Colognetop-7High footfall makes Cologne city centre attractive to retailers 25Real Estate Market Germany2025Retail space in Dsseldorf Prime retail rents in EUR per m Retail rents based on location in Dsseldorf in EUR per m Source:bulwie

218、ngesa Source:bulwiengesa Dsseldorf has developed successfully as a shopping location.The city centre has become much more attractive thanks to a number of urban planning infrastructure projects and major investment in new and existing retail properties.Although Dsseldorf has also felt the impact of

219、the negative factors which are afflicting the retail sector,they have been less severe for the rental business than in other top locations.Up to 2022,prime rents had declined by only 5 per cent from their peak levels and have since remained at EUR 270 per m.With rents having fallen much more steeply

220、 in Berlin,Frankfurt and Hamburg,Dsseldorf is today the second most expensive retail location.Plus points are a catchment area of 2 million people and purchasing power which is nearly 20 per cent higher than the German average.The city also benefits from its focus on the more stable luxury segment,w

221、hich is mainly located in the famous“K”shopping boulevard.Apart from the Knigsallee,other prime city centre locations are Flingerstrae and the redesigned Schadowstrae shopping street.In recent years,other iconic retail developments such as the K-Bogen and the KII have been added.The K shopping mall,

222、which was built in the 1980s,is to be gradually modernized.The former Kaufhof retail site Am Wehrhahn is to be repurposed as a new opera house.The future of the Carsch Haus department store built in 1915 one of the largest building sites in Dsseldorf remains uncertain,after an investor withdrew at t

223、he end of 2024.The realization of the Calatrava Boulevard which runs parallel to the K is even more uncertain.Space rental in city centre locations in 000 m Trend in tourism number of overnight stays per 1,000 inhabitants Source:BNP Paribas Real Estate Source:bulwiengesa 0408012016020024028032020042

224、007201020132016201920222025eDsseldorftop-704080120160200240280320200420082012201620202024retail prime rentaverage rent high streetmaximum rent secondary locationsmaximum rent peripheral locations040801201602002400612182430362013 1415161718192021222324Dsseldorf(LS)top locations(RS)01,0002,0003,0004,0

225、005,0006,0007,0008,0009,00010,000200320072011201520192023Dsseldorftop-7Revamped city centre remains crisis-proof 26Real Estate Market Germany2025Retail space in Frankfurt Prime retail rents in EUR per m Retail rents based on location in Frankfurt in EUR per m Source:bulwiengesa Source:bulwiengesa Th

226、e Frankfurt conurbation has shown dynamic growth in recent years.It now has a catchment area of around 2.5 million people with high purchasing power.The citys retail sector also benefits from a very high visitor volume,with more than 13,000 overnight stays per 1,000 inhabitants.By 2023,the figure ha

227、d almost regained its previous peak level of 2019.Frankfurt has a broad retail offer,with its two prime locations of Zeil and Goethestrae as well as several large shopping centres.Goethestrae,with its focus on the luxury segment,has developed much more successfully than the Zeil shopping street wher

228、e there are many vacant properties.Various new build and renovation projects are likely to have a negative impact there for some time.One example is the renovation of the P&C store as a multi-use property including a primary school.Contrary to earlier plans,the former Karstadt store will continue to

229、 be operated as retail real space.Currently,the Spanish fashion label Bershka is using the building as its largest European branch.Space which becomes vacant on the Zeil often attracts interest.Examples are the new flagship store of the sneakers retailer Snipes and the planned new branch of Thalia i

230、n the former Esprit building.Prime rents fell to EUR 261 per m in 2024,which represents a fairly moderate decline of 13 per cent from their peak level.Outside the city centre,the Skyline Plaza,which is only eleven years old,is to be modernized at a cost of EUR 35m.Fashion retailers will in future oc

231、cupy around a third of space compared to 60 per cent previously.The leisure and entertainment offer will also be expanded.Space rental in city centre locations in 000 m Trend in tourism number of overnight stays per 1,000 inhabitants Source:BNP Paribas Real Estate Source:bulwiengesa 0408012016020024

232、028032020042007201020132016201920222025eFrankfurttop-704080120160200240280320200420082012201620202024retail prime rentaverage rent high streetmaximum rent secondary locationsmaximum rent peripheral locations040801201602002400714212835422013 1415161718192021222324Frankfurt(LS)top locations(RS)02,0004

233、,0006,0008,00010,00012,00014,00016,000200320072011201520192023Frankfurttop-7Tourism gains momentum in Frankfurt the Zeil becomes a building site 27Real Estate Market Germany2025Retail space in Hamburg Prime retail rents in EUR per m Retail rents based on location in Hamburg in EUR per m Source:bulwi

234、engesa Source:bulwiengesa As the leading shopping location in northern Germany,Hamburg benefits from a catchment area of 3.5 million people and high purchasing power.Tourists and cruise passengers are an important customer group.The broad retail offer of classic shopping in Spitalerstrae and Mnckebe

235、rgstrae in the east of the city centre,and luxury locations such as the Neuer Wall and Jungfernstieg shopping streets in the west,is attractive to customers.The Europa Passage a large city centre shopping mall lies between them.As elsewhere,the negative factors affecting retail have led to closures

236、and vacant properties.However,space can often be relet as a result of interest from newcomers to the city centre.The Senate also encourages the temporary use of buildings for cultural purposes.For example,the further extension of the“Frei_Flche”programme at the end of 2024 has facilitated the contin

237、uation of the“Jupiter”cultural project in the former Karstadt Sport building.Conversely,the former Kaufhof building is to be repurposed for mixed use with housing,and retail and office premises.Prime rents are down by a good 18 per cent from their maximum to EUR 235 per m,and are mainly achieved on

238、Neuer Wall.In spring 2025,the shopping offer just outside the city centre will be enhanced by the forthcoming opening,after several delays,of the Westfield Hamburg-berseequartier development in the HafenCity with around 170 shops.Its approximately 80,000 m of sales space represents a quarter of avai

239、lable city centre space.Space rental in city centre locations in 000 m Trend in tourism number of overnight stays per 1,000 inhabitants Source:BNP Paribas Real Estate Source:bulwiengesa 0408012016020024028032020042007201020132016201920222025eHamburgtop-70408012016020024028032020042008201220162020202

240、4retail prime rentaverage rent high streetmaximum rent secondary locationsmaximum rent peripheral locations040801201602002400510152025302013 1415161718192021222324Hamburg(LS)top locations(RS)01,0002,0003,0004,0005,0006,0007,0008,0009,00010,000200320072011201520192023Hamburgtop-7Transformation of mai

241、n shopping street Mnckebergstrae;HafenCity will be a retail counterweight 28Real Estate Market Germany2025Retail space in Munich Prime retail rents in EUR per m Retail rents based on location in Munich in EUR per m Source:bulwiengesa Source:bulwiengesa Munich tops the retail league in Germany in ter

242、ms of prime rents,purchasing power and sales floor productivity.Favourable conditions such as an economically strong catchment area of more than 3 million people also play a part.High levels of migration are leading to steady growth in customer potential.Another plus point is the high quality of sta

243、y in the attractive city centre with a Bavarian flavour and an extensive offer of mid-range retail concepts,traditional specialist shops and luxury stores.Flourishing tourism is boosted further by the world-famous Oktoberfest.Prime rents have risen to the highest level in Germany,although the volume

244、 of city centre sales space is relatively high at just over half a million m.The highest rents are in Kaufingerstrae,Neuhauser Strae and Maximilianstrae.Prime rents have fallen by 14 per cent from their peak to EUR 297 per m.They remained largely stable last year.Signs of the retail crisis are also

245、evident in Munich in the form of vacant properties.However,new businesses often open up in shops and branches which have closed.Some former retail space is also being repurposed.For example,the upper floors of the former Karstadt Sports and C&A stores will be mainly used as offices in future.A large

246、 branch of the New Yorker fashion chain will occupy about half of the retail space still available in the C&A store from 2027.Solutions are still being sought for Signa projects such as the Karstadt complex at the station and the Alte Akademie.Space rental in city centre locations in 000 m Trend in

247、tourism number of overnight stays per 1,000 inhabitants Source:BNP Paribas Real Estate Source:bulwiengesa 0408012016020024028032036020042007201020132016201920222025eMunichtop-704080120160200240280320360200420082012201620202024retail prime rentaverage rent high streetmaximum rent secondary locationsm

248、aximum rent peripheral locations040801201602002400612182430362013 1415161718192021222324Munich(LS)top locations(RS)02,0004,0006,0008,00010,00012,00014,000200320072011201520192023Munichtop-7City centre benefits from extremely high purchasing power and many tourists 29Real Estate Market Germany2025Ret

249、ail space in Stuttgart Prime retail rents in EUR per m Retail rents based on location in Stuttgart in EUR per m Source:bulwiengesa Source:bulwiengesa Stuttgart benefits from a catchment area of nearly 3 million people and strong purchasing power.However,tourism is not quite as important as in other

250、top locations.This was not nevertheless the main reason for the comparatively sharp fall in prime rents in Stuttgart,which declined by 22 per cent from their peak in the prime location of Knigstrae.The negative factors for retail everywhere have been compounded in Stuttgart by the expansion ten year

251、s ago of sales space with two new city centre shopping centres.Retail activity has also been disrupted by major building works.In response to lower demand for sales space,one of the centres,the Gerber mall,has been repurposed for mixed use with retail outlets,bars and restaurants,offices,apartments

252、and a hotel.At the end of 2024,IKEA initiated a planning study here with the intention of bringing their green field residential solutions into the city centre.No downward trend has been evident in the city centre.Supporting factors are continuing high footfall in Knigstrae and stable prime rents si

253、nce autumn 2022.As in other city centres,vacant properties are visible and are also being repurposed for temporary use.One large building project is the“Schlossgartenquartier”building complex opposite the main station at the entrance to Knigstrae.Conversely,the Signa project“Two High Five”to replace

254、 the former sports arena(Knig-/Schulstrae)has stalled.Space rental in city centre locations in 000 m Trend in tourism number of overnight stays per 1,000 inhabitants Source:BNP Paribas Real Estate Source:bulwiengesa 0408012016020024028032020042007201020132016201920222025eStuttgarttop-704080120160200

255、240280200420082012201620202024retail prime rentaverage rent high streetmaximum rent secondary locationsmaximum rent peripheral locations0408012016020024001020304050602013 1415161718192021222324Stuttgart(LS)top locations(RS)01,0002,0003,0004,0005,0006,0007,0008,0009,00010,000200320072011201520192023S

256、tuttgarttop-7Prime rents stabilize after falling sharply 30Real Estate Market Germany2025OFFICE PROPERTIES After home working,economic slump now hampering demand for office space Sentiment among companies is poor and hopes of any prompt and comprehensive economic recovery have evaporated.The only ti

257、me the ifo Business Climate Index has ever dipped lower was during acute crises such as the global financial crisis or the pandemic.The economy stagnated for the second year running in 2024 and Germany is bottom of the growth league in the eurozone,hampered by weak exports,low investment,a slump in

258、construction activity and persistent spending restraint among households.The outlook for 2025 does not offer any glimmer of hope either;if anything,tariff announcements by US President Trump threaten to become an additional burden.The German economy is also weighed down by bureaucracy,high energy pr

259、ices,rising staff costs and a high level of staff sickness,leading to job cuts,relocations abroad or plant closures.Consequently,many companies are focusing less on expansion and more on cost savings,and,even,if their current office space no longer meets requirements exactly,they are postponing sign

260、ing up to new,up-to-date and mostly more expensive offices,opting instead to extend existing leases.However,not all German companies by any means are being affected by the countrys economic crisis.The impact in the case of international groups is at most limited.This is best illustrated by the perfo

261、rmance of the DAX40 which rose beyond the 20,000 point mark for the first time in December 2024.The office market should also be bolstered by the success of these companies.Poor sentiment among companies Business Climate Index in points,2015=100(February 2025)Space let in top locations falls to low

262、level Office take-up*to total stock in%Source:ifo Institute Source:bulwiengesa *)combined over the seven top locations On balance,though,the effects of lower demand for space through WFH and a flatlining economy cannot be ignored.Where leasing transactions do take place,the preference is for high-en

263、d offices in good locations,which aim to encourage staff back into the office.In addition,sustainable buildings are increasingly becoming an essential criterion for tenants,in spite of higher rents for such premises.Higher rents moreover can be put into perspective by smaller spaces and rising emplo

264、yee productivity.Large transactions of over 10,000 m as drivers of high office space take-up have become a rarity.Clients are mostly opting for smaller to medium-sized offices,a trend which,overall,is going hand-in-hand with visibly lower office space take-up.7075808590951001051102005200920132017202

265、12025ifo business climateassessment of the business situationbusiness expectations400,000500,000600,000700,000800,000900,0001,000,000200320062009201220152018202120244Q-averageaverage since 2003Office market hit as German economy now stagnating for second year in a row.but should be bolstered in some

266、 locations as international groups buck the trend Trend in the office market towards contract extensions and more medium-sized transactions 31Real Estate Market Germany2025Simultaneous rise in vacant space and office rents Take-up in the seven top locations fell to under 600,000 m per quarter in 202

267、4.Prior to the pandemic,the figure was still over 900,000 m.In addition,the figure is clearly below the 20-year average.At the same time,since 2020,falling demand for office space has been leading to a steady rise in vacancy rates.After a fall in the rate in the top locations to just under 3 per cen

268、t by 2019,it had risen steadily to just under 7 per cent by 2024.This figure is pretty much exactly in line with the long-term average since the turn of the millennium.This means that around 6 million m out of a total top location stock of 85 million m is not let.However,WFH and a change in the dema

269、nd profile for office space are not leading to a rising amount of empty space everywhere.According to a 2024 survey by the ifo Institute,around 6 per cent of companies above all service providers and large companies have reduced the size of their offices.However,this mostly affects top locations and

270、 another few larger office markets.In contrast,medium-sized and smaller office markets are reporting largely low and stable vacancy rates.Whereas the rate in top locations rose by 3.5 per centage point between 2019 and 2024,it only rose by half of one per centage point to around 4 per cent in the re

271、maining locations.It may be that remote working does not play such an important part in smaller locations with a strong SME business environment as it does in large cities with group head offices and international company bases.Moreover,activity in smaller office markets is often more occupier-drive

272、n.In cases where the head offices of regional industrial companies,banks or public authorities need fewer desks as a result of WFH,it is mostly difficult to downsize office space or sub-let parts of it:This is leading to hidden vacancies.Activity in Top7 livelier than in other office markets,prime o

273、ffice rents,in EUR per m however,vacancy rates in Top7 also rising faster vacancy rates,in%Source:bulwiengesa Source:bulwiengesa Unlike in the past,prime rents are not easing in the wake of rising supply;instead,the uptrend has continued unabated.In spite of the vacancy rate in top locations more th

274、an doubling since 2019,average prime rents in those locations have risen by around 25 per cent.However,the trend is uneven across the various office markets.The increase in prime rents is mainly in city centres and on the edges of the centre as well as in periphery locations.Tenants are only willing

275、 to pay higher rents for sought-after modern and sustainable offices,since such spaces aim to ensure higher presenteeism and better communication.In contrast,average rents in individual 681012141618202428323640442000200420082012201620202024top locations(LS)other cities(RS)012345678910112000200420082

276、012201620202024top locationsother citiesTake-up at an historical low,while the vacancy rate continues to rise Rising amount of vacant space through WFH mainly concentrated in large office markets Does WFH play a more marginal role in smaller markets or is there hidden vacant space?Prime rents may ri

277、se further in spite of rising vacancy rates Rent rises easier to implement in the case of modern office space 32Real Estate Market Germany2025office locations were flatter or even stagnated.Moreover,office space outside the top segment can often only be let with additional incentives such as a rent-

278、free period.The bulk of the office stock is decades old.Around half the stock in top locations was built before 1990 and is no longer up to modern standards;this puts landlords in a weaker position when it comes to negotiating.Prime rents have continued to increase in spite of rising vacancy rates L

279、S:rent in EUR/m,RS vacancy rate in%(top locations)Split development:Prime rents above all could increase further office rents in EUR/m Source:bulwiengesa Source:bulwiengesa Growth in white-collar work halted by flatlining economy and demographic trend A question mark hangs over the future trend in d

280、emand for office space and vacancy rates.Up to 2019,there was a steady decline in office vacancy rates on the back of rising employment,a higher proportion of office workers along with only moderate office construction.However,a marked fall in vacancy rates and sharp rise in office rents led to an u

281、pturn in office construction and hence rising vacancy rates from 2020 onwards.However,this pattern is unlikely to continue in the next few years since the trend in both employment and office construction is likely to have peaked,driven by a flatlining economy,ageing population and the crisis in the

282、construction sector.The number of people in employment rose by over 18 per cent within the space of 20 years from 39 to 46 million.However,the uptrend came to an end in the spring on the back of economic headwind.Since then,there has been a slight reduction in employment through of job losses in ind

283、ustry and the construction sector,and the decline would have been more pronounced without a sharp increase in employment in the public sector.The number of people employed in the public sector rose by almost half a million to 5.3 million in the period from 2018 to 2023.The number of office workers r

284、ose even more strongly than employment overall.Across Germany,more than 15 million people now work at a desk.Consequently,the proportion of office workers has risen from around 31 to 33 per cent within 20 years.However,a flatlining economy is not the only driver behind faltering employment growth.Ba

285、by boomer generations of the 1950s and 1960s are gradually retiring and not being replaced by subsequent cohorts,which have been characterized by a low birth rate.The extent of the impact of an ageing population is also dependent on other factors,though.Immigration,a higher retirement age,rising emp

286、loyment rate or less part-time work can mitigate the demographically-led decline in employment which is going hand-in-hand with dwindling demand for office space.01234567891011122022242628303234363840424420032006200920122015201820212024office prime rent(LS)vacancy rate(RS)051015202530354045prime ren

287、tcityprime rentcityoutlyinglocationsprime rentperipherallocationsaveragerent cityaveragerent cityoutlyinglocationsaveragerentperipherallocations20202021202220232024Up to 2019,decline in vacancy rate fuelled by increase in number of office workers Only slight decline in employment since number of pub

288、lic servants continues to rise Disproportionate rise in number of office workers Impact of ageing population on employment dependent on several factors 33Real Estate Market Germany2025 Slight decline in employment;fall in job vacancies LS:no.of people in employment in million,RS:job vacancies in 000

289、 Birth rate never recovered after dip brought about by advent of the Pill births in 000 Source:Federal Employment Agency Source:Destatis However,the decline in demand for office space may also be eased by a rising number of mandatory office days since more and more companies are increasing their req

290、uirement for office attendance often to three or more days per week.WFH is here to stay,however,as illustrated by the wish for remote working expressed by many office workers in a large number of surveys.The reasons given for this are looking after children and caring for elderly parents or pets.The

291、 extent to which employees will be able to have their wish will also depend on the situation in the labour market.However,the shortage of skilled workers is likely to increase as a result of demographics.Another aspect is the lack of housing for new staff in top locations.If companies insist on high

292、 presenteeism,they will need to solve the housing problem and factor in the need to pay higher salaries in order to offset high housing costs.Companies will have a chance to mitigate the impact of a dwindling labour supply brought about by an ageing population through the use of artificial intellige

293、nce(AI).AI will mainly free staff from routine tasks.It is impossible to say as yet how fast its use will progress and to what extent the need for human employees will decline.Vacancy rate dampened by tight supply and alternative uses On balance,the question is not so much whether demand for office

294、space will dwindle but rather by how much.According to the survey carried out by the ifo Institute mentioned earlier,at least 8 per cent of companies are planning to reduce their office footprint in the next five years.However,prospects regarding future demand are generally better for the top locati

295、ons,as suggested by good national and international connections,a good labour supply through big universities along with migration from home and abroad.Top markets could also benefit if companies rationalize locations.In the past also,these were the markets where the overall number of office workers

296、 and their share of the total workforce saw strong growth overall.The number of office workers rose by almost 45 per cent to 3.3 million within the space of a quarter of a century.0100200300400500600700800900373839404142434445461995200020052010201520202025labour force(LS)job vacancies(RS)02004006008

297、001,0001,2001,40019501960197019801990200020102020from 1955 to 1970:19.8m birthsfrom 1995 to 2010:11.6m birthsPresenteeism picking up again,but WFH here to stay Can AI make up for the demographically-led decline in labour supply?34Real Estate Market Germany2025 Sharp increase in office work at top lo

298、cations in the past LS:in 000,RS:share in%Falling vacancy rates are driving office construction,but rising building and financing costs will put a severe brake on it again from 2022 building permits for office space,2015=100 Source:bulwiengesa Source:Destatis Modern office space is likely to remain

299、in tight supply in spite of persistent demand.A sharp rise in construction and financing costs along with the fact that a number of developers went bankrupt have brought many building plans to a halt.The trend in building permits numbers have fallen by around one third since the end of 2021 points t

300、owards fewer office completions in the next few years.Apart from weaker office construction,the repurposing of redundant office buildings is also likely to slow down the rise in vacancy rates.Although,a change of use in office buildings often involves high costs,the outlook for such projects is bett

301、er in the seven biggest cities in view of high rents in these locations.Possible uses are regular flats,commercially managed properties,hotels or even schools.Another factor in favour of a change of use is that demolishing buildings and starting again from scratch is seen in a bad light from an envi

302、ronmental point of view.Manage-to-Green approach a financial challenge for office Decarbonization in the face of climate change is a major factor for office buildings which are often quite old.One aspect involves more stringent requirements in the Building Energy Act(GEG)or heating law,which include

303、 not only heating requirements for large commercial properties,but also building automation.Even more important,though,is the tenants search profile.Whereas it is still easy to let flats even if they are not up to scratch as regards heating in view of a tight supply,the general decline in demand for

304、 office space is increasing the vacancy risk for offices with a poor sustainability rating.After all,companies want a clean green score sheet when it comes to their employees,customers,investors and lenders.Regulatory requirements,such as EU taxonomy are therefore also having an indirect impact on l

305、easing office space.Owners are likely to be well aware that the risk of assets becoming stranded increases in the case of office buildings with poor energy efficiency.However,a manage-to-green approach also has to be achievable financially.Although leasing prospects increase after a refurbishment,in

306、vestment costs must also be sufficiently reflected in rising rents.Unlike in the case of office markets where rents are low,financial prospects for a comprehensive refurbishment in top locations are better in view of high rents just as in the case of repurposing.40414243444546472,0002,2002,4002,6002

307、,8003,0003,2003,40019941998200220062010201420182022total office workers in top locations(LS)share of all employed persons in the top locations(RS)507510012515017520022525019962000200420082012201620202024Faltering office construction accompanied by tightening supply Office buildings fairly easily rep

308、urposed for housing,schools or hotels Offices with poor sustainability rating difficult to let Green investment important,but also has to make financial sense 35Real Estate Market Germany2025Office market:Overview of locations The impact of the new work concept described earlier and changes in requi

309、rement profile for offices that it entails is clear in all the top locations.Whereas the vacancy rate in 2024 was back to the level of 2014 at just under 7 per cent,prime rents have risen on average by over 60 per cent to almost EUR 43 per m during this ten-year period on the back of strong demand f

310、or high-end offices.However,there are wide variations in the momentum of the upturn and levels reached from one location to another among the top-7.The vacancy rate increased by an average of 4 per centage points to 6.9 per cent from 2019 to 2024.The smallest increases were in Hamburg and Cologne at

311、 2 and 2.4 per centage points to 4.9 and 4.7 per cent respectively.The strongest rises were in Berlin and Munich which previously had the lowest vacancy rates of only marginally above 1 per cent.The rate in Munich rose by 4.8 per centage points to 6.2 per cent;in Berlin,it increased by 5.6 per centa

312、ge points to 6.9 per cent.The rate in Stuttgart lifted by 3.5 per centage points to 5.4 per cent.Even in the past,Dsseldorf and Frankfurt had the highest vacancy rates at 10.1 and 11 per cent respectively.The figure in both these locations is therefore roughly twice the level in Hamburg,Cologne and

313、Stuttgart.Just like the vacancy rates,there were also noticeable differences in prime rents,depending on the top location.In Berlin,prime rents more than doubled to EUR 45 per m from 2014 to 2024.As such,the per centage increase was almost three times more than in Frankfurt where prime rents recentl

314、y reached EUR 47.50 per m.Meanwhile,Munich has not only replaced Frankfurt as the most expensive German office market with prime rents of EUR 54 per m;it is ahead by a long way.Rents in Dsseldorf and Stuttgart have experienced above-average growth with a rise of around 75 per cent.Whereas the increa

315、se to EUR 33.50 per m most recently in Stuttgart has been steadier,in Dsseldorf,it was concentrated in the period from 2022 to 2024.During those three years,prime rents on the Rhine shot up by almost 60 per cent to EUR 42 per m.The increase in neighbouring Cologne was smaller.The cathedral city has

316、therefore replaced Stuttgart as the cheapest office market among top locations.Hamburg ranks between Cologne and Stuttgart with prime rents of EUR 35.3 per m.Rents in the Hanseatic city are characterized by a moderate and steady rise over time.Strong,even steep rise in some cases in rents for modern

317、 offices prime office rents,in EUR per m Vacancy rates of the top-7 office markets have increased significantly vacancy rate,in%Source:bulwiengesa Source:bulwiengesa 26.242.8152025303540455055Berlin Dussel-dorfFrank-furtHam-burgCologne MunichStutt-gartTop-7201420246.87.2024681012Berlin Dussel-dorfFr

318、ank-furtHam-burgCologneMunichStutt-gartTop-720142024Higher vacancy rate failing to slow down rise in prime rents.but huge differences in increase and above all level of vacancy rate Munich overtakes Frankfurt as most expensive office market in Germany by far 36Real Estate Market Germany2025 Office s

319、tock has mostly increased through construction projects in Berlin annual new available office space in million m Source:bulwiengesa At first glance,the rise in vacancy rate reflects not least more office construction for which there were also good reasons in light of rising rents and a declining sup

320、ply up to 2019.On closer inspection though,it is clear that the increase in available new space has been concentrated in Berlin.From 2001 to 2010,Berlins share of the new space was around 15 per cent whereas in the past five years,the figure was around 40 per cent.From 2020 onwards,annual available

321、new space in the German capital was around 500,000 m.In contrast,available new space in the other six top locations has been quite stable for over 20 years now at a combined figure of around 700,000 m.In all,there were around 800,000 m of available new space per annum in the top seven locations from

322、 2005 to 2018.Thereafter the combined figure was around 1.2 million m per annum.The differences in the amount of new space becoming available in the top seven office markets have also had an impact on the stock.There has been a marked increase in the stock in the last ten years,above all in Berlin(+

323、16 per cent).Berlin is by far the biggest office market in Germany with almost 22 million m of office space.The biggest markets in the remaining locations vary from just under 8 to almost 15 million m.Apart from Stuttgart,which has seen a ten-year increase of 10 per cent,expansion in the office stoc

324、k has been at best moderate;it even shrank slightly in Frankfurt,reflecting not least some repurposing,e.g.for housing.Marked differences in size and growth rates of local markets office stock in million m,change in office space in%Marked fall in take-up everywhere since the pandemic Take-up as%of o

325、ffice stock(5-year average)Source:bulwiengesa Source:bulwiengesa 0.00.40.81.21.62.02.40.00.40.81.21.62.02.42000200220042006200820102012201420162018202020222024BerlinDsseldorfFrankfurtHamburgCologneMunichStuttgartwithout Berlin21.714.614.310.38.38.07.81675-11073BerlinMunichHamburgFrankfurtStuttgartCo

326、logneDsseldorfoffice space 2024change from 2014 to 20244.94.85.04.14.14.73.83.43.23.23.23.13.22.30123456BerlinDsseldorfFrankfurtHamburgCologneMunichStuttgartfrom 2015 to 2019from 2020 to 2024Increase in vacancy rate through more office construction?Berlin above all has benefited from new available s

327、pace Marked expansion in Berlin office stock,but slight contraction in Frankfurt 37Real Estate Market Germany2025Although the many office projects in Berlin have gone hand-in-hand with an improved supply of sought-after modern office space,it appears that this is not leading to higher take-up.Indeed

328、,annual take-up at all the locations with the exception of Stuttgart has fluctuated at around 3 per cent of the office stock.In contrast,prior to the pandemic,take-up was not only much higher,but there were also much more pronounced differences.Overall,take-up in 2024 only reached around 60 per cent

329、 of the record level in 2017 at just under 2.4 million m,reflecting a decline in demand for space and persistent economic doldrums.Outlook:Office prime rents and vacancy rates continue to rise WFH and a flatlining economy are dampening demand for office space,a picture which is likely to continue in

330、 2025 as well.In addition,there is the problem of the baby-boomer generations of the 1950s and 1960s coming to retirement age and possibly also AI which is set to take over human tasks through more advanced algorithms.However,this does not mean that the outlook for office space is bleak.The experien

331、ce of the last few years has shown that there are advantages to employees working together in an office and that this cannot always be replaced entirely by online communication.In addition,it is far from being the case that every single company is in crisis,as record-high share prices illustrate.In

332、this respect,the top locations occupy a special position among office markets through advantageous local factors.They are likely to grow and therefore enjoy relatively robust demand for office space.Against this background,demand is mostly for modern space for new work in green buildings.The good le

333、ttability of modern office space is gradually likely to go hand-in-hand with a growth in the surplus of older offices.Consequently,rents for modern space should continue to rise,while it will become more difficult to let older space.This year,though,increases in prime rents are likely to flatten in view of a weak economic trend.However,even vacancy rates are unlikely to continue to rise unabated.P