According to Savills, the major German office markets such as Berlin, Dusseldorf, Frankfurt, Hamburg and Munich continue to be weak in the third quarter of 2009 however the cyclical downturn is showing signs of deceleration.

As was the case of the previous quarter, take-up in the first nine months of the year was almost a third (-32%) below the previous year’s figure, the exception being Berlin where vacancies increased across the board, on average almost every tenth square metre of office space in the major German city is unoccupied (9.4%).

Due to the weak demand, prime rents stand slightly below their previous year’s level in almost every market. Over the past months downward movement was only marginal ( Berlin, Frankfurt and Munich) or stable (Düsseldorf and Hamburg). Average rents are slightly below the level of Q3 2008. Furthermore, in numerous lease contracts concluded in locations or properties less sought after incentives of up to 10% of the agreed rent have been granted to the tenants. Hence the net effective rents in some cases may be well below the nominal rents published.

All of the five markets suffered a double-digit percentage reduction in take-up, with the largest falls being recorded in Düsseldorf (- 51%), followed by Munich (- 36%), Hamburg (- 31%), Frankfurt (- 26%) and Berlin (- 21%). Thus Berlin proves considerably more stable than three months ago when take-up had declined by -30% compared to the previous year. By contrast, Frankfurt performed considerably weaker compared to its half-year result (- 19%), not least due to the large-scale letting to Deutsche Bahn in Q1 which now has an increasingly reduced effect on the letting figures.

Savills forecasts a total take-up of approximately 2m sqm in the five markets for overall 2009 compared to 2.83m sqm transacted in 2008 marking a reduction of approximately -29%.