German office property market in recession in third quarter 2020


The pbbIX office property market index saw a further significant fall in the third quarter. The index fell to -0.7 points form 0.09 points in the second quarter, marking its lowest level since the end of the financial crisis. As a result of the COVID-19 pandemic, a significant slowdown in demand for space and a significantly lower investment volume were the main drivers for this development.

In the third quarter, let space fell significantly behind the results regularly achieved in previous years, showing that economic uncertainty and potential structural shifts are proving to be major challenges for businesses in the service sector. As a result, expanding and relocating is no longer the dominant issue. However, rents are stable so far.

In line with rentals, inflows on the investment markets have also plummeted during the course of the year. Hitherto, the contraction in demand has had no negative impact on pricing, prices for office properties remained on a high level. Against the background of economic weakness and a weakening market for office space, this development can only be explained by the exceptionally low level of interest rates.

Economic output soared in the third quarter, regaining more than half of the slump from the first six months of the year. This positive development was mainly down to the normalisation of macroeconomic activities following the first lockdown. Whether the recovery will continue in the fourth quarter will depend very much on the further course of the pandemic and the measures taken to contain the recent sharp rise in the number of infections.

The regional markets showed largely the same picture: the index levels for all individual markets are negative and range between -0.5 points for Stuttgart and -0.9 points for Munich.

The full report for the 3rd quarter of 2020 is available here.