Saturday, 15 March 2025
Munich has once again solidified its position as Germany’s leading office market, recording a substantial increase in take-up in 2024. The city’s office market outperformed Berlin and Hamburg, reaching a total take-up of 606,000 square meters. This marks a significant 30% increase compared to 2023, despite still falling 17% short of the long-term average. The resurgence in demand was primarily fueled by large-scale lettings exceeding 10,000 square meters, which saw a remarkable tenfold rise from the previous year.
Throughout 2024, the Munich office market exhibited consistent growth across all four quarters, with the final quarter leading as the strongest. The last three months of the year contributed 162,000 square meters to the total take-up, reinforcing a positive year-end momentum. Key transactions in this period included two of the four largest lettings of the year. The Technical University of Munich (TUM) secured 19,300 square meters for an innovation campus at the airport site, while Capgemini committed to 13,600 square meters on Prinzregentenstrasse. Additionally, the Bavarian State Parliament took up 19,200 square meters, further boosting the market’s overall performance.
The robust demand for premium office space has been reflected in rising rental prices. Prime rents increased by 9% over the past year, reaching €53.50 per square meter, while the average rent now stands at €25.00 per square meter. This trend underscores the growing appeal of high-quality office locations and premium developments in Munich’s competitive real estate market.
Despite the strong take-up performance, vacancy rates have also seen an uptick. The overall vacancy rate rose by 1.1 percentage points compared to 2023, bringing the total to 7.4% or 1.69 million square meters. Notably, nearly half of this vacancy volume is accounted for by modern office spaces, totaling 830,000 square meters. However, the city center remains an exception, with an exceptionally low vacancy rate of just 2.9%. In this prime location, only 98,000 square meters of office space is currently unoccupied, of which merely 5,500 square meters belong to newly constructed properties.
Looking at sector-specific activity, the administration offices of industrial companies emerged as the leading driver of take-up, accounting for 21% of the total volume. ICT firms followed closely behind with a 17% share, while public administration and consultancies each contributed around 15%. This distribution highlights the continued demand for office spaces from key economic sectors, reinforcing Munich’s status as a diverse and resilient office market.
Among the most notable leasing deals of 2024, the Bayerische Versorgungskammer secured the largest contract, leasing 25,200 square meters in the second quarter. Other significant agreements included TUM’s airport campus deal and the Bavarian State Parliament’s lease, both mentioned earlier. Meanwhile, Isar Aerospace and BA die Bayerische Allgemeine Versicherung each signed contracts exceeding 11,000 square meters.
While the demand side has demonstrated strength, supply dynamics suggest further shifts in the market. The vacancy rate is expected to continue rising in 2025, particularly in subcenters and peripheral locations, where supply has outpaced demand. Conversely, in central locations, the availability of premium office space is expected to dwindle, further tightening conditions for occupiers seeking prime properties.
The macroeconomic outlook for 2025 remains a crucial factor in determining the trajectory of the Munich office market. While economic recovery may gain momentum, external factors such as political developments in the U.S. and Germany could introduce volatility. Nevertheless, if the newly elected German government provides stability and economic support, this could lead to increased office take-up in the second half of the year.
Going forward, the Munich office market is poised for further rental growth, particularly in prime locations. With demand for large-scale office spaces rising—especially from international firms—prime rents are expected to see further increases in 2025. Additionally, as the availability of newly constructed office space declines, competition for premium properties is likely to intensify.
The evolving landscape presents both challenges and opportunities for investors, landlords, and occupiers. Those with high-quality, centrally located office spaces stand to benefit from sustained demand, while areas with oversupply may need to adapt through repositioning strategies. With Munich remaining a top choice for businesses seeking a dynamic and stable office market, the city’s commercial real estate sector is set to remain a focal point of investment and development in the coming year.
Source: BNP Paribas Real Estate GmbH
