There is an awareness of the need for cost efficiency on the occupier side, but the ‘flight to quality’, i.e. a strong focus on high-quality locations and properties, remains as strong as ever. This is true not only in the CBD (Central Business District), but also in the other submarkets. In some cases, occupiers are agreeing expensive rents and investing significantly in the fitting out of their space. In Frankfurt it is typically law firms, banks and financial services providers, and consultancies, who dominate this quality segment of the market.
While (major) banks are consolidating their locations and total space, and the largest law firms are not currently concluding large-scale deals, HR and management consultants are highly active in the high-end market segment and are increasing their office footprints, often in central and expensive locations. Since fewer large deals are likely to take place in the near future, this poses challenges for many Frankfurt owners, for example in terms of how standard floor plates can be subdivided for smaller lettings where the overall infrastructure makes it feasible at all.
Parallel to the increase in the overall vacancy rate, the short notice availability of high-quality space in central locations is increasingly scarce, partly due to the lack of suitable product in the construction pipeline. This in turn will result in a further hike in prime rents.