11. Mai 2012     Print Print 

German office market nearly balanced

The results of the German Office Rent Reversion Index (DMX), annually published by IPD and by alstria office REIT-AG, show a very low rent reversion for the reporting year to May 2012. After the strong result of 3.9% in the last reporting period the current value of the DMX to May 2012 is only 0.3% and therefore shows a nearly balanced relation between the average contract rents and the average sustainable rents of office leases. The current contract rent for all running office leases is 12.85 €/sqm/month which is very close to the average sustainable rent of 12.89 €/sqm/month.

The German Office Rent Reversion Index (DMX) shows the potential for rental growth for the German office market by comparing the contract rents with the sustainable rents and thus creating more transparency for the German office market. While in the last year nearly all analyzed office markets showed a positive rent reversion, this reporting year shows much more diverse results. “About half of the eight analyzed locations, including the B-Cities segment, show a positive rent reversion and therefore potentially increasing rents. The other half shows a negative rent reversion, which means potentially decreasing rents”, explains Lars Dierkes, project manager at IPD Investment Property Databank GmbH, Wiesbaden. “But the amounts of rent reversion in the positive direction as well as in the negative direction are very moderate in this reporting year – with the exception of Hamburg – compared to the results of last year.”

Sustainable rents in all analyzed locations decreased
After the positive growth of sustainable rents of 7.7% on average in the last reporting period to May 2011, sustainable rents could not keep this level in the last 12 months. The results of the DMX show a decrease of sustainable rents in all analyzed locations. On average the decrease was -3.8%, whereas Frankfurt am Main shows the strongest decrease with -7.0%. In contrast, the average contract rents were nearly stable and only decreased by -0.3% compared to last year’s value. Most of the analyzed locations even show a slightly positive growth of contract rents in the last 12 months except Frankfurt am Main which shows the strongest decrease of contract rents with -6.5%. The strongest increase of contract rents was currently measured in Munich with 2.1%. “For us as an investor, the DMX is a very useful tool”, says Olivier Elamine, CEO of alstria, “however, we do not focus that much on the actual numbers, but are interested in the trend. It shows that there is not much to be expected from the market in terms of rent reversion. Value needs to come from hard work, the market will not help.”

Hamburg shows the strongest positive rent reversion Due to the decrease of sustainable rents and the nearly stable contract rents, both values have become very close and result into a very small rent reversion of 0.3%. The highest positive rent reversion is currently measured in Hamburg with 6.3%, followed by Munich with 0.7%, Frankfurt am Main with 0.6% and Cologne with 0.5%.

Dusseldorf shows the highest negative rent reversion with -3.0% followed by Stuttgart with -2.2% and Berlin with -1.3%. Average contract rents and sustainable rents in the B-Cities segment are nearly balanced and therefore only show a slight rent reversion of -0.3% In the long-term view of rent reversions over the last 10 years, Berlin shows the strongest positive rent reversion of 6.1% on average per year, followed by Frankfurt am Main with 2.4%. The highest negative potential in the long-term view was measured in Dusseldorf with -4.8% on average per year, followed by Cologne with -2.2%. B-Cities show a slightly positive rent reversion of 1.1% and therefore nearly match the total long-term result of the DMX with 1.0% average rent reversion per year.

“The insights of the DMX and its regional sub-indices are reliable and a good basis for further analyses, as IPD put together a very comprehensive database with primary data”, explains Dr. Daniel Piazolo, managing director of IPD Investment Property Databank GmbH. The results of the DMX are based on eight sub-indices that are calculated out of 26,000 office leases with a monthly rental value of €336m. These leases are analyzed based on their market segments and their lease term and lease age.