- pbbIX index rises for the third time in a row to -0.74 points at year-end
Munich, 24 February 2022 – The economic situation on the German office property market is continuing the upward trend of the last two quarters. Since its low of -1.51 points in Q1 2021, the pbbIX office market index for the seven major German cities has risen steadily to -0.74 points at the end of the year. This means that the market is still in recession, but the downturn has slowed again. The risks resulting from the COVID-19 pandemic should wane over the next few months. Supply chain issues are also expected to ease. A new negative factor, however, is the potential impact of higher inflation on the macroeconomic development and the office market.
In the final quarter of 2021, recovery for the German economy was interrupted by the fourth pandemic wave. Adjusted for seasonal effects, real gross domestic product fell by 0.7% compared to the previous quarter. This worse-than-expected downturn was mainly driven by slow private consumer demand, which in turn was burdened by containment measures and by consumers adjusting their consumption patterns due to the pandemic. At the same time, supply bottlenecks, raw material shortages, and soaring prices for primary products burdened construction investments, which were also lower quarter-on-quarter.
Activity on the market for office space continued to increase in the fourth quarter of 2021, significantly more than in the previous reporting period. Supported by favorable labor market developments and high pre-letting levels, 1.14 million sqm of office space was taken up in the last quarter. Over the entire year, 3.3 million sqm was let i.e. 23% more than in 2020 and only 15% less than in the high-turnover years between 2015 and 2019.
Capital inflows increased, thus contributing to a stabilizing investment market. According to figures provided by Real Capital Analytics, the investment volume for office properties on the big 7 markets amounted to €17.5 billion in 2021, a decrease of just under 12% year-on-year which mainly resulted from a weak first quarter. Capital inflows have since been stabilizing, mainly coming from domestic demand for first-class office properties.
The seven submarkets continue to present a very mixed picture. Only the Berlin market is already expanding again, with an index level of 0.24 points.
The complete report for the fourth quarter 2021 is available at pbbIX.com