BERLIN—Rents on prime German office space have increase on average by 3.8% for the first quarter compared to a year ago.

This, according to a recent report by Savills, the international real estate adviser based here. The research reflects conditions in the six top German markets: Berlin, Cologne, Dsseldorf, Hamburg, Frankfurt and Munich. The average price was around $35 (€26.98) per square meter, or around $3.50 per square feet.

The international real estate adviser expects to see ongoing prime rental growth across those top markets for the rest of the year with continued high demand for quality space while development activity remains low.
Marcus Mornhart, managing director at Savills Germany, says: “We anticipate further moderate rental growth in Germany's prime office segment going forward in 2013. However, rents in the wider market are unlikely to increase in 2013 with rent-free periods continuing to be perceived as good form even at the prime end of the market. Secondary stock or space in less central locations continues to record rather high vacancies and occupiers are considerably more price-conscious.”
After a strong 2012 the German office market slowed significantly in Q1 2013 with take-up totaling just below 573,000 sq m in the top six markets representing a year-on-year decrease of almost 20% (from 713,600 sq m in Q1 2012). The firm attributes this decrease primarily to a lower number of large-scale lettings compared with Q1 2012, particularly in Frankfurt, Berlin and Cologne but expects turnover to pick up later in 2013 due to a number of large requirements on the market. Nonetheless, the remaining three markets recorded positive turnover figures of +4.7% in Dsseldorf, +8.4% in Hamburg and +10.0% in Munich compared to Q1 2012.
In terms of vacancy rates, these continued to decline marginally across the six major markets according to Savills data. On average across all markets surveyed, 8.6% of the total office stock was unoccupied at the end of the first quarter, which compares to 8.7% in Q4 2012. In certain market segments office stock is even running short, for example in Frankfurt the firm records a lack of prime space in core locations below 1,000 sq m while in Cologne there is an undersupply of centrally located space in the medium price range.