- pbbIX records third consecutive fall and remains below the zero line
- Strong locations continue to score, especially in terms of rents
Munich, 24 August 2023 – The pbbIX real estate index continued to decline in the second quarter of 2023. It was down to -1.25, the lowest level since the beginning of 2021. The continued decline was due to persistent economic weakness as well as to the slowdown in the market for office space and a disappointing investment market.
The German economy stagnated during the second quarter of 2023, and the economy is now ranging between a weak recession and a drowsy recovery. Accordingly, positive impulses for the office real estate market were lacking. The demand for office space – which was already weak to begin with – continued to decline, resulting in a further (albeit modets) increase in vacancy rates. Inflows on the investment market remained very low, which led to another marked increase in net initial yields. Despite rising rents, this subsequently resulted in lower property values.
Demand for office space weakened accordingly in the second quarter. Space take-up was down for the fourth consecutive quarter, even though the decrease was not as pronounced as in the previous quarters. A total of 556,000 sqm was taken up in the big 7 markets, which compares to more than 600,000 sqm in the first quarter. In total, take-up during the first half of the year declined by 40% compared to the previous year’s figure. While this decline affected almost all sectors, the public administration and the industrial sector were hit the hardest, with take-up down by more than 60%.
Inflows on the investment market remained at a very low level during the second quarter. Whilst inflows were up compared to the previous quarter, the aggregate of the first six months was at its lowest since the first six months of 2009. The market is going through an arduous phase of price adjustments. The price expectations characterised by the long-lasting low-interest rate phase and strong demand for office space meet a significantly higher interest rate environment and uncertainty with regard to the future development in the market for office space.
The individual big 7 markets continued to trend downwards as well, and the phenomenon of partially increasing top rents even as vacancies rise persists. This was observed in Munich and Berlin, in particular.
The complete report for the second quarter of 2023 is available at pbbIX.com.