Real estate market Ruhr 2024

The completion statistics are led by Dortmund with 64,000 sqm, followed by Essen with 28,500 sqm and Bochum with 25,800 sqm. The largest completion in the first half of the year was the new headquarters of IT service provider Materna in Phoenix-West with 44,000 sqm. For the year as a whole, the volume of new construction in the Ruhr metropolis is expected to be higher than in 2023 (192,200 sqm). The Dortmund pipeline alone is expected to deliver up to 130,000 sqm of new office space in 2024. In the future, the number of completions in the Ruhr metropolis will decline. Projects without significant pre-letting are still under scrutiny and will not be realized for the time being. This not only applies to the Ruhr region, but can be observed in all major office metropolitan areas, which will see a decline in completions from 2025, and from 2026 at the latest.

On a positive note, the increase in vacancies is clearly losing momentum. At the end of the first half of the year, 5.1% of office space in the Ruhr metropolitan area was vacant. In the core cities, the figure was 5.4 %. The main reason for this development is that new construction projects - unlike in the seven A cities - have already been largely absorbed by the market and are therefore not leading to further distortions. There is currently a lack of economic impetus to stimulate demand. Companies that do not necessarily have to relocate are postponing rental decisions. 

The achievable prime rents are once again showing a slight upward trend, although this is primarily limited to the core cities. Here, prime rents are now in a range of EUR 17.00 to 22.50/sqm. It remains to be seen how quickly these will actually be realized on the market. Despite reaching the interest rate peak and an initial interest rate cut, net initial yields for office properties have risen again slightly. In the four core cities, prime yields are between 5.30% and 5.40%, around 20 to 30 basis points above the level at the end of 2023. On the investor side, there is still a degree of uncertainty about the development of user markets, which is only likely to dissipate once the economic outlook improves. On the other hand, declining inflation and the prospect of further interest rate cuts are positive factors. However, this is only likely to have a stimulating effect on the investment market for office properties after a certain time lag.

Overall, demand for retail space is falling, which is increasing the pressure on rent levels. In the Ruhr metropolitan area, rents for retail space in central locations fell by 4.2 % in the core cities and by 1.7 % in the Ruhr metropolitan area as a whole compared to the same period last year. However, the fall in rents for bricks-and-mortar retail is not limited to the Ruhr region, but can be observed in most A-cities. Net initial yields for commercial properties in the Ruhr metropolitan area are currently between 5.00 % and 6.50 % in the core cities and reach a level of up to 7.30 % in the Ruhr metropolitan area as a whole. This means that premiums of between 20 and 50 basis points have been recorded compared to the same period last year. The outlook for bricks-and-mortar retail in the Ruhr region is currently subdued, mainly due to the stagnating economy and subdued consumer sentiment. Rental trends are becoming increasingly polarized: while rents in the top retail locations in the Ruhr metropolis (such as Westenhellweg in Dortmund) are stabilizing, rents in the retail locations in Essen and Duisburg remain under pressure. This situation is exacerbated by the increasing number of vacant stores, which are becoming increasingly difficult to let.

The development of take-up in the second half of the year will largely depend on available supply. Requests for space in the first half of the year were mainly met in existing buildings, especially as speculative new logistics buildings in particular are declining significantly due to the change in financing conditions. Nevertheless, the volume of new construction increased by around 35% to around 156,000 sqm compared to the first half of 2023. The district of Unna was the most active here with just under 57,000 sqm. It was followed by the Ennepe-Ruhr district with around 51,000 sqm and the Wesel district with 24,500 sqm..

The pipeline and the generally challenging project development business mean that a lower volume of completions is expected for the year as a whole than in 2023. There is a clear upward trend in rents compared to the first half of 2023. The logistics market in the Ruhr metropolis has also recorded significantly higher growth rates than the logistics markets in Berlin, Frankfurt and Cologne. However, it should be noted that the majority of rent increases were already recorded in the second half of 2023 and that prime rents are gradually moving sideways. Prime rents range from EUR 7.00 to EUR 8.00/sqm in most submarkets in the Ruhr region. Secondary locations are between EUR 5.00 and EUR 6.50/sqm depending on the quality of the location and type of property.

The transaction market in the Ruhr metropolis has not yet been able to benefit from the peak in interest rates and falling inflation. Compared to the first half of 2023, turnover in commercial real estate fell by around 5% to around €703 million. Turnover from logistics and industrial properties amounted to €198 million, up around 55% on the same period of the previous year.

Prime yields have risen by a further 20 to 30 basis points compared to the 2023 level. Duisburg remains the most expensive logistics location with a net initial yield of 5.00%, followed by Dortmund at 5.30% and Essen at 5.50%. Due to the first cut in the prime rate in June and the prospect of further interest rate cuts in the future, a slight upturn in investment activity is expected in the second half of the year. The pricing process is almost complete and the supply of investment opportunities will increase due to difficult refinancing conditions and cash outflows from real estate funds, which should have a positive effect on transaction figures.

The completion figures for Unternehmensimmobilien show a downward trend in the first half of 2024 compared to 2023. By the end of the first half of 2024, just under 20,000 sqm of new space had been created, with project developments in the Hagen, Oberhausen, Ennepe-Ruhr district and Recklinghausen district markets. It should be noted that no current completions were registered in the core area. This trend is also reflected in the A cities, where the completion figures in the Unternehmensimmobilien segment fell sharply in the first half of the year. Compared to 2023, the negative framework conditions have hardly changed, especially as the hoped-for economic boost for small and medium-sized companies has failed to materialize. This demand group reacts sensitively to relocation or optimization requests, as the focus is always on financial risk and current order intake and company size are difficult to calculate. For project developers, the well-known issues of space availability, land costs, construction costs and difficult access to the capital market for project financing are at the forefront. Without appropriate pre-letting, projects are virtually impossible to implement, meaning that speculative new builds are an absolute exception. 

After the first half of 2024, take-up of more than 40,000 sqm net lettable area for Unternehmensimmobilien was already registered in the Ruhr region. Although this figure is significantly below the figures for 2019 to 2022, it is almost exactly half of the full-year figure for 2023. This means that take-up has stabilized at a moderate level, making it possible to reach the previous year's figure.  

Despite the difficult market situation, rental prices continue to show slightly positive trends. The highest rents are traditionally achieved for office, social and flex space. Assuming that the economy improves, the absorption of flex space with high sustainability standards, such as those found in modern business parks in particular, should increase again. They potentially appeal to a broad user base and enable risk diversification. Third-party usability, reversibility of use and compliance with ESG standards are fundamental requirements for contemporary properties. As a result, older existing properties in particular are only marketable to a limited extent. Modern properties are likely to benefit from further increases in rents. As predicted at the end of last year, price corrections in the Unternehmensimmobilien segment will be much more moderate once interest rates have peaked and the key interest rate has been cut for the first time. It remains to be seen to what extent further interest rate cuts will affect prices. Yield levels in the Unternehmensimmobilien segment are largely determined by the user markets, i.e. the demand for space. As there is currently no economic stimulus, there are no decisive influencing factors here.

The transaction volume is only slightly below the result for the same period of the previous year (€743 million). Although the Ruhr metropolitan area, Stuttgart and Berlin are the only markets with a year-on-year decline in transaction volume, the decline from 2022 to 2023 was also less pronounced in the Ruhr metropolitan area than in the A cities. Despite the slightly lower than expected result, the investment market is showing a slight upturn again. According to market participants, this can be seen in particular in the increase in pitches. Despite reaching the peak of interest rates and an initial interest rate cut in June, further, albeit more moderate, price corrections can be seen in all segments. Initial evaluations show that these are most noticeable in the office segment. The skepticism towards this asset class is still due to the issue of remote work and uncertainty about companies' future space requirements. Investment activity remains very cautious in all A cities.

The increases in transaction volume in the first half of 2024 are often attributable to special individual deals, such as the sale of KaDeWe in Berlin or Fünf Höfe in Munich. These transactions alone accounted for around 50% of the respective total volume in the cities in the first half of the year. The volume of commercial real estate transactions in Germany rose by around 20% year-on-year to €12 billion in the first half of 2024. This level corresponds to that seen shortly after the financial crisis.