Berlin´s Office Leasing Market in 2023: Challenges and Outlook
In recent years, Berlin has emerged as a significant hub for businesses and entrepreneurs. With a growing population, a thriving startup scene, and a strategic location in the heart of Europe, the city has garnered much attention. Office leasing activity in the German capital has been dynamic in the past decade, influenced by various economic and social factors.
Image: Bright office space (Source: Freepik).
In the first quarter of 2023, office space take-up in Berlin saw the lowest performance since 2014: JLL recorded a take-up of 140,600 sqm, which is down by 22% compared to the same period last year.
Berlin´s office market, just like all other Germany´s locations are facing current challenges including the decline in momentum with deals getting smaller. The COVID-19 pandemic has also had an impact on the office market, with remote work becoming more common and companies rethinking their office space needs. The number of vacant spaces offered by companies for subletting are increasing.
Despite these challenges, structural trends emanating from new work and ESG (Environmental, Social, and Governance) are accelerating and driving rental growth. A shortage of quality office spaces in prime locations is making it more difficult for businesses to find suitable premises.
In general, it can be said that the office leasing market is still proving to be very resilient with rental growth driven by structural trends and is expected to remain so in the medium term. Demand remains high for office spaces, particularly in central districts like Mitte and Kreuzberg, where many technology and creative firms are headquartered. The influx of companies looking to establish a presence in Berlin has contributed to a decrease in available office space, which in turn, has led to increased rental prices.
Some businesses such as in the tech sector are becoming more cautious when it comes to new letting contracts, but management consultants, the legal and tax sectors are expanding and happy to pay for high quality space in top locations.
Outlook for the Rest of 2023:
- Steady Demand: Office leasing activity is expected to remain steady through the remainder of the year. Companies from sectors like technology, e-commerce, and renewable energy are likely to continue to seek office spaces in Berlin.
- Rise of Hybrid Workspaces: As companies adapt to new working patterns, the demand for hybrid workspaces that combine traditional office space with flexible working solutions is anticipated to rise.
- Focus on Sustainable Building: There is a growing trend towards sustainability, and businesses are increasingly looking for office spaces that are environmentally friendly and sustainable. This could lead to an increase in demand for green-certified buildings.
- Increase in Rental Prices: With the ongoing supply constraints and high demand, rental prices for office space in Berlin are likely to continue to increase through the end of 2023.
Conclusion:
The Berlin office leasing market is navigating through a period of transformation in 2023. While the demand for office space remains high, the challenges of economic uncertainties, changing work patterns, supply constraints, and regulatory changes are influencing market dynamics. For companies looking to lease office space in Berlin, staying abreast of market trends and being adaptable to changing conditions will be key to making the most of the opportunities that the city offers. The second half of 2023 will likely continue to see an evolution in the kinds of office spaces sought, with a focus on flexibility, sustainability, and innovation.
References:
- JLL: Office Market Overview - Q1 2023
- CBRE: Real Estate Market Outlook 2023 | Germany