Vacancy rate rises slightly and so do rents

New Jena office market report published: Multiple crises and transformations

Despite all the economic and geopolitical challenges in 2022, the office space market in the City of Light Jena is proving to be stable. This is the conclusion of the eighth office market report published by the Jena Economic Development Corporation (JenaWirtschaft) in cooperation with the Department of Urban Development and Environment and the "Jena Office Market" working group. According to the report, reactions to the changing world of work, economic uncertainties and location-specific factors characterize market activity. In concrete terms, this means that fewer and smaller spaces were marketed and the vacancy rate rose slightly by 0.4 percentage points to 1.7 percent. The respective micro-location of a property - i.e. where exactly a property is located in the city - is becoming increasingly important. Overall, office space in the City of Light increased to almost 750,000 square meters. Companies from the scientific and technical services sector in particular are looking for space, thus shaping the market and remaining economic drivers in the city.

Multiple crises challenge the market

JenaWirtschaft project manager Patrick Werner, who compiled the report, summarizes the study as follows:

"As in the previous year, players in the commercial real estate market are having to maneuver through uncertain waters. High construction and energy costs, the war in Ukraine, the rather poor global economic situation and the turnaround in interest rates are also hampering the economic outlook in the domestic market".

In addition, the limited availability of suitable properties is slowing down the market, which is not helped by the moderate increase in vacancy rates. Companies have reduced so-called 'shadow vacancies' in particular in order to save costs. This means that space was brought onto the market to serve as a growth reserve.

Less take-up, higher rents, slight increase in vacancies

According to the report, demand in 2022 shifted towards smaller spaces of up to 250 square meters, which are more flexible and cost-efficient. As a result, last year's take-up of 15,170 square meters was also comparatively low. However, the willingness of individual sectors to pay, for example from the digital economy, remains high. The prime rent in the office market last year was EUR 16 per square meter - around EUR 3 more than in 2021. In general, the average rent rose to EUR 10.60 per square meter. The rent range narrowed slightly.

Limited scope and transformation of offices

And what's next for the Jena office market?

"Looking ahead, the competitive pressure for attractive space will continue, as suitable existing space is becoming scarcer, most new space is being built for own use and at the same time the negotiating leeway of many players is shrinking,"

says Patrick Werner. Therefore, compared to recent years, the "overall package" is more important than ever. According to the new report, the changing world of work is also having an increasing impact on supply and demand for office properties. Hybrid working is now standard - which is why many companies need fewer traditional office workspaces, according to Werner. This is supported by the decline in office space take-up of more than 500 square meters and longer marketing times overall. At the same time, however, the demands on employees' working conditions are increasing.

"The ideal space should be both highly customizable and take into account the tenant's cost and location sensitivity,"

says Werner. The workplace remains important as a place to meet and work together. So while the number of desks is decreasing, the proportion of communication and social spaces is increasing.

Sustainability remains a trend and a requirement

Ecological sustainability also remains both an important trend and a requirement for properties by potential tenants. This is polarizing the market: on the one hand, competition for affordable properties that meet legal and environmental requirements is intensifying. On the other hand, there is the challenge of existing properties that do not meet these sustainable criteria being permanently devalued.

Robust resilience

"Many Jena companies have learned to deal with multiple crises in recent months and years. This resilience also supports the Jena office market, which, despite all the challenges and the gloomy forecast for the current financial year, will be able to come up with projects in all of the city's office market zones in the coming years. Many steps have been taken to further develop Jena as a sustainable location, but clever approaches, collaborations and projects are still needed to recognize and fully leverage potential,"

summarizes JenaWirtschaft authorized signatory Markus Henkenmeier.

Important key figures of the Office Market Report 2023 at a glance:

Note: The figures refer to 2022. The office market report collects and analyzes the annual data from the previous year.