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Brexit relocation plans fuelling Frankfurt office market
September 5th 2018
By Relocate Global
The office market in Frankfurt has experienced a boom throughout 2017. Real-estate firms suggest that financial institutions relocating as a result of Brexit are influencing the market in the city.
Analysis from leading real-estate firms and investors shows that demand and prime rents in the financial centre of Frankfurt are reaching record highs, while the vacancy rate is declining to its lowest point in years.
London financial firms relocating to Frankfurt as a result of Brexit
Nearly 16 months after the Brexit referendum, developments in the Frankfurt office market reflect the city’s popularity among banks leaving the UK. Estimates currently suggest that around 10,000 jobs could relocate to Frankfurt over the next four years. Numerous construction projects will help to meet the high demand for premium office space.Increased demand in the market has driven investor confidence, and analysts report a notable increase in transaction volumes compared with 2016.Frankfurt has also seen larger deals exceeding 10,000 square metres as firms seek larger, contiguous office space to accommodate their expanding operations and personnel. Despite increases in demand and prime rents, the Financial Centre Frankfurt remains competitively priced relative to other European financial centres.Gert Waltenbauer, CEO of investment management company, said, “Frankfurt can strengthen its post-Brexit role as a leading financial centre and additionally enhance its appeal, as the decision made by a number of London banks to base their EU headquarters in Frankfurt shows.“The airport is conveniently located near the city centre and is a genuine Frankfurt asset, the importance of which will continuously increase with growth in trade and European integration.“Office buildings in Frankfurt, in particular, are rising substantially in value as a result. However, what we are also noting is that residential quality has improved in Frankfurt over the last few years, and this is having a corresponding effect on the intrinsic value of residential real estate.”Noted for its strong economic and political stability, Frankfurt and the region offer a strong infrastructure, a deep talent pool, and a high quality of life, noted Hubertus Väth, managing director of Frankfurt Main Finance.Mr Väth continued, “The Financial Centre Frankfurt is in the pole position to win banking business from London following the results of the UK’s referendum.“Financial services moving to Frankfurt will find a competent, helpful and welcoming regulator in BaFin, who will accept large portions of applications in English. The Financial Centre is already home to more than 150 foreign banks and 75,000 people employed in financial services.”
Office space demand in Frankfurt hits a high
The Frankfurt office market is continuing to expand rapidly. With a take-up of 477,000 square metres, it achieved its best result of the last 15 years. This performance puts the city third behind Berlin and Munich, said José Martinez and Oliver Barth, managing directors and Frankfurt Branch heads of a big Real Estate.They continued, “Remarkably, demand is spread relatively evenly across all size classes and market segments, thus testifying to the broad basis for this demand.“On a particularly encouraging note, several large-scale deals in excess of 10,000 square metres emerged again at last. After the shortage of the last few years, they are currently accounting for 20 per cent of total volumes. One of the largest contracts – around 27,500 square metres – was signed by Helaba in Kaiserlei.“At this stage, the extent to which Brexit leaves traces on future trends in the Frankfurt commercial real-estate market still remains to be seen. The fact is that, although Brexit is being felt on the Frankfurt market, it is not a dominating factor.”
Markus Kullman, associate director of office leasing at Frankfurt am Main for property consultancy JLL, said, “JLL is in constant close contact with a very large number of companies that expect Brexit to impact some of their business segments.“Service providers addressing the financial sector are also exploring the market for suitable floorspace. However, the Frankfurt office real-estate market is not an unknown quantity for most potential tenants, as they already have at least a small representative office in the city."After already becoming evident last year, one fact has been confirmed in our recent talks, namely that it is not a question of a full-scale relocation of a large number of jobs from London to Frankfurt but of incrementally building up the necessary capacity. And in the most important cities of Europe.“Apart from Frankfurt, Paris, Amsterdam, Dublin and Luxembourg also play a role. We expect around 100,000 square metres of office space to be absorbed above and beyond customary market demand in the wake of Brexit.”
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