Despite Covid-19 and the associated renewed lockdown measures, the office market in Germany’s capital, Berlin, witnessed its strongest Q4 since 2015 with take-up of 280,100 sq m. Even compared with the average of the last 10 years, 2020 as a whole only recorded a decline of 9 per cent in take-up, despite the pandemic.
The decisive factor for the strong year-end result were larger lettings to Apple, Netflix (at WeWork) and Delivery Hero, among others. This shows that it’s not only the public sector that continues to take space in Berlin. Having a range of sectors taking offices, with more in the pipeline, gives the city stability and security for the months ahead. The lettings by Apple and Delivery Hero in particular could be harbingers of the future direction of user interest: A-location, A-location, A-location.
Rents seem to be of secondary relevance here, as prime rents in Berlin increased in Q4 by 1.5 per cent to €41.50. Even if there’s a slight further increase in vacancy rates to come, continuing the trend from 1.2 per cent in 2019 to 2 per cent in 2020, this isn’t enough to turn the market from a landlord to a tenant one this year. Especially as landlords, at least for the moment, are not returning space to the market, given the ongoing uncertainties around Covid-19.
In negotiations, some landlords are prepared to lower the effective rent through incentives. The general rule here is the more central the location, the less willingness there is to offer incentives. The more peripheral the location, the greater the willingness to do so.
The supply side is therefore somewhat flexible, although not much more can be expected here when looking at the pipeline. It is difficult to say to what extent demand will change quantitatively. However, qualitatively, it will certainly change as is already becoming clear in discussions with users. Competition for the best space is, if anything, increasing.
These are exciting times ahead, but one thing is already certain today: good quality office space in Berlin continues to remain attractive for occupiers and investors alike.
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