Frankfurt’s Office Market to Experience Record-Breaking Q1 2025 Fueled by Major Bank Relocations
Frankfurt’s struggling office market is set for an unexpected surge in activity, with the first three months of 2025 potentially becoming the most successful quarter ever, according to industry experts.
Surge in Demand Driven by Bank Relocations
The anticipated boost in demand stems from a number of large-scale office relocations by major banks. ING Deutschland has recently announced its plans to occupy approximately 32,000 square meters in a new headquarters in Frankfurt’s Ostend neighborhood in 2028. Commerzbank is also set to lease an additional 73,000 square meters in the Central Business Tower in Frankfurt’s banking district, consolidating around 3,200 employees from decentralized locations.
Combined, these two transactions alone account for over 100,000 square meters of office space, driving total leasing activity in Q1 2025 to potentially surpass 180,000 square meters, significantly higher than the 370,000 square meters leased throughout 2024.
Trend Reversal Amidst Office Market Challenges
The surge in demand is a welcome reversal for Frankfurt’s office market, which has been grappling with high vacancy rates in recent years. The vacancy rate rose to 9.7% in 2024, driven by the prevalence of remote work and economic uncertainty. The rise in home office adoption is expected to reduce office space demand in major German cities by over 10% by 2030.
Return to Office and Polarization of Demand
Despite the shift towards remote work, some companies are demanding more in-person presence from their employees. "The trend towards home office is flattening," observed Suat Kurt, head of the Jones Lang LaSalle (JLL) office in Frankfurt.
This has resulted in a polarization of demand, with prime locations in the city center experiencing strong competition, while B-locations such as Frankfurt-Niederrad and City-West continue to struggle with high vacancy rates. "We see twice as much demand in the city center than outside," Kurt said.
Modern Offices in High Demand
Modern offices with ample natural light, large windows, and flexible floor plans are particularly sought after, leaving older buildings with outdated designs struggling to find tenants.
Conversions to Residential Not a Viable Option
Despite the high vacancy rates, converting office buildings to residential units is not a viable option in Frankfurt. "Last year, we didn’t see any conversion projects in the city," Kurt said. Investors are more inclined to consider conversions to hotels or mixed-use developments.
Strict regulations and high construction costs make residential conversions less attractive for investors. "Conversion requirements for apartments are even higher than for commercial use, especially regarding social housing regulations," Kurt explained.
Outlook for Frankfurt’s Office Market
The influx of major bank tenants and the return to office trend point to a potential recovery for Frankfurt’s office market. However, the polarization of demand and the need for modern, high-quality office spaces will continue to shape the market landscape.
