Metropolis job market sees an upward trend in vacancies, reaching a peak since 2013. - Metropolis job openings reach their peak since 2013 record
The office market in major German cities - Berlin, Hamburg, Munich, Frankfurt, Düsseldorf, Cologne, and Stuttgart - is currently experiencing notably high vacancy rates alongside cautious demand and selective leasing activity.
### Current Vacancy Rates
The overall vacancy rate across these seven metropolitan hubs is about 7.7%, the highest in over a decade and well above the healthy benchmark of around 5%. City-specific vacancy rates reveal disparities, with Frankfurt and Düsseldorf exceeding 10%, signaling structural oversupply in parts of their markets. Munich’s vacancy rate rose to over 7%, but is expected to stabilize, while Berlin’s vacancy is forecasted to reach 9% by 2026. Hamburg remains the strongest with a vacancy rate near the natural level of 5%.
### Factors Influencing Demand and Vacancy Trends
The ongoing trend towards remote and hybrid work models continues to reduce demand for traditional office space. Economic uncertainty, including worries about U.S. tariffs and an economic slowdown, has made companies hesitant to commit to new leases or expansions, leading some to extend existing leases instead of signing new agreements.
Despite this, office leasing activity in the first half of 2025 showed a slight increase in take-up (+9% year-on-year in some reports), but momentum has recently cooled, with postponements and more cautious decision-making by tenants. Construction completions are declining overall, with significant decreases in Berlin (-43%) and Munich, but Düsseldorf and Hamburg show increased completions and construction activity. Berlin leads in office space under construction (over 1 million m²), followed by Munich (640,000 m²), although occupancy of these new spaces remains low.
### Summary of Market Dynamics
| City | Vacancy Rate (2025) | Market Outlook | Key Influencing Factors | |-------------|---------------------|--------------------------------------|-----------------------------------------------| | Berlin | Up to 9% (forecast) | Structural vacancies; cautious demand| High construction; remote working effects | | Hamburg | ~5% | Stable natural vacancy | Relatively balanced supply-demand | | Munich | >7%, stable forecast | Strong rental growth | High-quality space demand, active construction| | Frankfurt | >10% | Structural oversupply | High vacancy; cautious leasing | | Düsseldorf | >10% | Oversupply in sub-markets | Increased construction, selective demand | | Cologne | Not explicitly given | Part of general trend | Similar to Düsseldorf | | Stuttgart | Not explicitly given | Part of general trend | Similar to Cologne |
### Conclusion
The German office market is marked by rising vacancy rates well above healthy levels, driven mainly by ongoing structural changes such as remote work, economic uncertainty, and cautious corporate investment. However, there are significant regional differences, with Hamburg showing resilience, while Frankfurt and Düsseldorf face oversupply challenges. Munich and Frankfurt benefit from demand for high-quality office space, supporting prime rents and yields.
The market outlook for 2025-26 suggests stability for prime properties in key locations but cautious tenant behavior overall, with companies preferring lease extensions over new commitments. For investors and occupiers, location and building quality remain critical factors in navigating this uneven market.
- Investing in vocational training programs within the community could not only help address the current economic uncertainty faced by businesses but also reduce the vacancy rates in the real-estate market, as well-trained workers could potentially stimulate demand for office space.
- As finance plays a crucial role in any business decision and the German office market is currently experiencing notably high vacancy rates, businesses could consider alternative investment strategies, such as diversifying into sectors less dependent on physical office space, like vocational training, to mitigate risks and maintain stability during economic downturns.
