Deutsche Pfandbriefbank : 23.05.2019 Good office market situation in Germany continued in the 1st quarter – Index pbbIX almost unchanged compared to previous quarter

• Combined vacancy falls to 3.1%
• Lower inflow of funds initial yields continuing to fall slightly

The 7 largest German office markets remained on an upward trend in the first quarter, thus defying the challenges of the weaker economic development once again. This is shown by the pbbIX office market index, which fell only slightly from 0.80 to 0.79 points compared to the previous quarter. The index thus continues to remain at a level that suggests a bullish office market trend.

The lynchpin of this development is the situation on the space and rental markets. Vacant office space in the major office locations is currently very limited. Overall, the demand for office space remained higher than the number of new buildings being completed. In the first quarter of 2019, the combined vacancy rate in the BIG7 markets fell once again and, at 3.1%, is now at a level last reached around 19 years ago. This obvious, and in places extreme, shortage continued to result in rising rent prices for new contracts.

The pbbIX was supported by developments on the investment market. The inflow of funds, which mainly came from international investors, was significantly lower in the first quarter of 2019 at € 2.7 billion than in the record fourth quarter of 2018 (4Q18: € 9 billion). However, initial yields, despite a slight decline, clearly show that investors continue to regard office properties as very attractive.

For the individual top 7 office locations in Germany, the pbbIX showed a mixed picture in the first quarter. The index rose slightly for the markets in Berlin and Stuttgart but fell slightly for the other 5 office locations. Düsseldorf continues to have the best office market economy with an index level of 1.16 points; however, Düsseldorf also recorded the strongest decline in the 1st quarter of 2019 compared to the previous quarter, when the pbbIX stood at 1.32 points.

The risks and uncertainties for the further development of the office market in the seven major German cities are largely the same as in the previous quarter. The economic slowdown calls for caution. In addition, the scope for further strong increases in capital values is likely to be largely exhausted due to the very low initial yields. In the long term, capital values can only rise with the development of rental prices.

Please find the full report here.

 
Notes to the editors:
The pbbIX index family comprises the composite index, as well as seven individual indices tracking the key German office property markets of Berlin, Cologne, Dusseldorf, Frankfurt/Main, Hamburg, Munich and Stuttgart, including their respective catchment areas.

pbbIX describes the development of the office markets. The zero line corresponds to the long-term trend. If the index is above the zero line, the office market is better than the long-term average. From a value of 1.0 points, one speaks of a boom.

The indices, which pbb publishes in cooperation with vdp Research, provide investors and lenders with comprehensive information on the current performance of office properties in Germany.