ppbIX: slight upward trend continues

- The pbbIX continued to rise tentatively in Q1/2025 and reached a value of -1.85 (Q4/2024: -1.86). 

- Despite positive office rental growth, no sub-segment of the index provided clear growth impetus in the first quarter of the year.

- Demand for office space and rental growth could increase moderately over the course of the year             

Munich, 15 May 2025 - The year 2025 began with very hesitant economic growth overall. Demand for office space held up well despite the economic weakness but remained below average. Take-up on the investment markets remained low at the start of the year. In the prime segment, initial yields have remained constant for a year now and capital values have only risen due to the continuous growth in rents.

After two consecutive years of recession, the German economy recorded a slight increase of 0.2% in the first quarter of 2025. Despite declines in key interest rates since mid-2024, the recessionary economic trend combined with geopolitical and economic uncertainties continued to hamper the office property markets. Although the ifo Business Climate Index in April 2025 assessed the current situation for companies as slightly better than in the previous month, ongoing geopolitical risks continued to dampen the business expectations of German companies. Nevertheless, the construction industry is hoping for a recovery in the medium term thanks to the infrastructure package that has been agreed.

The office space markets of the BIG 7 started the new year with more momentum in the first quarter of 2025 than in the two previous years. At 730,000 m², take-up increased by 16 % compared to the same quarter of the previous year (630,000 m²). In the context of economic stagnation, however, this take-up result remained around 12% below the long-term average. 

With a completion volume of 160,000 m², new construction activity was around 60% lower than in the same quarter of the previous year. There was also a drop of the same magnitude compared to the previous quarter. The vacancy rate increased noticeably and stood at a weighted average of 7.4% across all BIG 7 markets in March 2025, 140 basis points higher than twelve months previously. 

In line with the demand for high-quality space, prime rents continued to trend upwards. In the 1st quarter of 2025, they were 5% higher than a year earlier. Average rents rose at the same rate year-on-year. Competition for prime space in central and well-connected locations continues and will also ensure rental growth in the prime segment in 2025. 

The inflow of funds on the BIG 7 office investment markets decreased in the first quarter of 2025 with a volume of around €1.25 billion compared to the end of the year (Q4 2024: €1.4 billion). Nevertheless, 2025 got off to a pleasing start compared to the 1st quarter of 2024, in which only around € 700 million was invested. An average of €4.1 billion was invested in office properties over the last ten years (1st quarter of each year). The current result was therefore around 70 % below this average level.   

Frankfurt stood out among the metropolitan markets. The office space market in Frankfurt set a new record in the 1st quarter of 2025 with take-up of 200,000 m². Compared to the same quarter of the previous year, this represents a doubling of take-up.

The full report on Q1 2025 can be found here and, as always, at pbbIX.de for download.