Germany's flexible office sector is experiencing a dynamic shift, with Munich emerging as a formidable competitor to long-standing market leader, Berlin.
The data points reveal fascinating trends, including increasing demand, shifting occupier preferences, and a supply/demand imbalance that characterises Munich as a seller's market.
Despite Berlin still receiving the greatest number of enquiries in Germany, Munich is quickly catching up. From Q1 2022 to Q1 2023, Munich experienced an astounding 59% growth in demand, surpassing Berlin's 14% growth rate. This surge signifies the growing popularity of Munich as a business destination and highlights the city's appeal for companies seeking flexible office solutions.
Shifting Occupier Preferences
While Berlin continues to be a magnet for larger occupiers seeking flexible spaces, Munich is experiencing a notable shift in occupier preferences. In 2023, there has been a significant increase in the number of inquiries for office spaces with 25 or more desks, accounting for 41% of total desk inquiries compared to 27% in 2022. This shift indicates a rising demand for larger office spaces, reflecting the growing presence of established companies and enterprises in Munich. However, despite this trend, when considering the overall size of the market in terms of square footage, Berlin still outpaces Munich with approximately 8.6m sq. ft, compared to Munich's 4.4m sq. ft.
The changing occupier landscape in Munich can be attributed to the influence of the technology and consulting sectors, which have emerged as prominent drivers of the flexible office market. In 2023, these industries accounted for over 50% of transactions in Munich. The city's thriving tech scene and its reputation as a hub for innovation and expertise are attracting an increasing number of technology and consulting firms, thereby fuelling the demand for flexible office spaces.
Supply Dynamics: Berlin vs. Munich
While demand is soaring in Munich, the supply of flexible office spaces remains primarily concentrated in Berlin. Since the onset of the pandemic, Berlin has experienced a 20% growth in supply, compared to Munich's 14% growth. This discrepancy has resulted in a significant supply/demand imbalance in Munich, positioning the city as a seller's market.
The supply/demand imbalance in Munich has led to an increasingly challenging environment for prospective tenants. As available space becomes scarce, rates for workstations have surged by 15% in 2023 when compared to pre-pandemic. This upward trend in rates highlights the limited availability of flexible office spaces and the intensifying competition among occupiers vying for prime locations. Munich's seller's market conditions necessitate proactive planning and swift decision-making for businesses seeking to secure flexible office solutions in the city.
The growing supply/demand imbalance signals potential opportunities for landlords seeking entry into the flexible office market and creates an opportunity for clients with grey space with long leases to explore partnering with operators to monetise vacant space.
Munich continues to shake up the flex landscape
The flexible office sector in Germany is currently undergoing a significant transformation, with Munich emerging as a formidable competitor to Berlin's long-established dominance. Munich's rapid surge in demand, evolving occupier preferences, and its attractiveness to technology and consulting sectors have played a pivotal role in reshaping the market landscape. However, it is important to recognise that Berlin still possesses a larger inventory of flexible office spaces, while Munich grapples with a supply-demand imbalance that favours sellers. As businesses navigate this dynamic sector, it becomes crucial to carefully analyse the distinct dynamics and market conditions of both cities to secure an optimal flexible office solution that aligns with their unique requirements.
