Frankfurt Office Market Q1 2025

Vacancies have increased in the entire market area since the end of 2024. The vacancy rate (excluding sublet space) rose from 9.5% to 10.0%. There are significant differences between the individual submarket clusters: the vacancy rate in the CBD was 6.7%, in the city-fringe locations 10.7% and in the peripheral submarket locations 11.5%.

In the first three months of 2025, the prime rent rose from €49.00 to €51.00/sq m/month. The weighted average rent across all new leases signed in the previous twelve months rose disproportionately by 15% to €29.65/sq m/month from the fourth quarter 2024 to the first quarter 2025, in line with the large, high-priced leases in development projects.

Trends

• Excluding the large-scale lettings in excess of 10,000 sq m, the take-up in the first quarter totalled some 83,000 sq m, a slight decline of 6% compared to the quarterly average of the last three years 
• Over the past three months, the highest vacancy increases were recorded in the Europa City submarket (due to the availability of space in the Kastor building) and the Niederrad/Lyoner Quartier submarket (due to the completion of the total ESG refurbishment and the restructuring of the Prisma building)
• There is a marked increase in price disparity between central and peripheral locations: over the past twelve months, the weighted average rent has risen by 22% and 8% in the CBD and city-fringe respectively, while in the periphery it has fallen by 6%
• The occupancy of the Central Business Tower and Central Parx development projects has reduced the supply of contiguous new-build or refurbished space of over 10,000 sq m in the submarkets of the CBD; the properties undergoing refurbishment, Fürstenhof (planned completion in 2026) and Park Tower (planned completion in 2028), offer potential
• Prime yields for premium office properties in the CBD have been at 5.10% since the end of 2023, at 5.40% in the city-fringe and at 6.65% in the periphery submarket locations; in exceptional cases (in particular for core products in CBD locations), the current prime yield could be undercut in individual cases, while downward price corrections are to be expected for peripheral locations and properties of average or poor quality

The strong start to the year should not be seen as the inevitable start of a return to the market dynamics observed before 2020. There are indications that Frankfurt office take-up hit its lowest point in 2024 and that the upward trend is gradually resuming, provided the overall economic situation permits it. A take-up of up to 450,000 sq m is therefore conceivable for 2025 as a whole.

A notable increase in vacancies has been observed since 2020, and this is not expected to decrease in the short to medium term. A further increase in vacancies is possible, as users continue to focus on projects and premium properties, while landlords of older stock are finding it increasingly difficult to find tenants. ESG and active asset management are becoming increasingly important for landlords and investors to meet the changing demands of users.

The planned completion volume for 2025 is 114,400 sq m, which is 24% below the ten-year average. More than two-thirds of it has already been let. By the end of 2027, a total of some 400,000 sq m of new construction and refurbishment space is planned to be completed. The pre-letting rate stands at 39%. However, it should be noted that new construction activity continues to be dampened by the recent increase in financing costs. Planned new developments are likely to be postponed if pre-letting rates of up to 30% or more are not achieved. The limited supply of new and refurbished space has the potential to lead to further rent increases in prime segment.