No signs of slowing – strong first half year for Frankfurt Office Market

Following 2017’s record results, the office market in the Financial Centre Frankfurt continues to boom with take-up in the first half of 2018 reaching third highest level of the past ten years and the best first quarter since 2000. According to experts at BNP Paribas Real Estate, CBRE, Savills Investment Management and Jones Lang LaSalle, the high level of activity in Frankfurt is leading towards the lowest vacancy rate in 15 years which will continue to fall in the latter half of 2018.

As a result of Brexit, 25 financial services firms have declared intentions to expand or move operations to the Financial Centre Frankfurt. Frankfurt Main Finance expects about 2,000 Brexit related positions will be relocated to Frankfurt by the end of 2018 and still holds its estimate of up to 10,000 potential positions in the medium-term, which have yet to impact demand on the real estate market to their full-extent.

Financial services firms affected by Brexit can still expect to find ample, modern office space in the city centre. Frankfurt remains affordable in international comparison, despite the waning vacancy rate now at 8.3% and Prime Rents increasing to 43 EUR/m2/month, according to data published by BNP Paribas Real Estate. In fact, the Financial Centre Frankfurt is just a fraction of the price of London or Paris. In the second quarter, prime rents in London and Paris topped 118 and 71 EUR/m2/month, respectively. Both cities have a vacancy rate below 6%.

These developments are discussed in detail by the Managing Director and branch head of BNP Paribas Real Estate, José Martínez, and Carsten Ape, Managing Director of CBRE, Andreas Trumpp of Savills Investment Management and Markus Kullmann of Jones Lang LaSalle (JLL), as well as Managing Director of Frankfurt Main Finance, Hubertus Väth.

The deviations in the data concerning vacancy rate, take-up or prime rents between the participating real estate firms result from the varying collection methodoligies or populations. Frankfurt Main Finance does not weight or value the individual methods, but instead presents them transparently.

José Martínez, Managing Director of BNP Paribas Real Estate GmbH and Frankfurt Branch Manager

“The upward trend in the Frankfurt office market continues. With a take-up of 273,000 m2 in the first half of 2018, the result is just under 14% above the ten-year average. Compared nationwide, take-up was higher only in Munich and Berlin.

In no other city are the results distributed so evenly across the various industry groups as in Frankfurt. First place is taken by banks/financial services with a share of 14.5%. Second place is taken by co-working providers, which contribute just over 12 % and are gaining increasingly in importance as a demand group in Frankfurt as well. The top three is completed by the group media and advertising, which is responsible for 12%. Places four to six are filled by three industry groups, which each have a share in take-up of just under 11%. These are public administration, ICT firms and consultancies. This even distribution of the result underlines impressively the very broad demand base and lively market activity. Among the most important deals were the leases of 24,000 m² by the FAZ newspaper in Europaviertel, 8,300 m² by the German Finance Agency in Heddernheim/Mertonviertel and 8,000 m² by the Bethmann Bank in the Banking District.

The reduction in the amount of vacant space has continued and currently stands at 1.28 million m². This is the lowest volume in the last 15 years. Of the total vacancy, however, just under 48% (611,000 m²) has the modern quality preferred by occupiers. The vacancy rate in the overall market has fallen to 8.3%. The biggest problem remains the shortage of space in the central, highly-sought-after locations. Due to the strong demand and inadequate supply of high-quality space, construction activity has increased. A total of 592,000 m² is under construction, but only about half of it is available to the market; the rest is already pre-let. It also needs to be taken into account that most of the supply is only concentrated on a few projects, which in some cases will not be available until 2023. As a result of the relationship between supply and demand outlined above, the top rent has increased compared to the previous year by 12% to 43 €/m². A similar dynamic upward trend has also been recorded for average rents, which have risen by just over 8% to currently 18.30 €/m².

The strong demand situation and the supportive economic environment for the occupier markets will stimulate take-up in the second half-year. This will be even more the case, because the share of major deals should increase. Against this background, an above-average take-up is again expected for the year as a whole, which should exceed the 600,000-m² mark. As the reduction in the amount of vacant space will continue, albeit at a slower rate, a further increase in rents is expected.”

Carsten Ape, Managing Director, CBRE

“Thanks to the strong economy, Frankfurt is in a dynamic state. We are observing an unwaveringly high demand in the office market. With an office space take-up of 253,700 m2 the first half of the year was 13 % above the strong previous years. That strong momentum at the beginning of the year persists throughout the first half of the year.

While the first quarter of the year was dominated by single large-scale projects such as the Frankfurter Allgemeine Zeitung leasing around 24,000 m², the current growth in Frankfurt can mainly be attributed to the traditionally strong financial sector: in addition to banks, consulting firms and law firms, companies from the real estate industry are looking for space.

Moreover, the focus increasingly lies on small-scale objects of up to 1,500 m² – a segment which made up 53% of the 106,800 m2 take-up of the second quarters. Co-working is contributing to that upsurge: within just a few years take-up increased from 1,100 m² in 2015 to 24,800 m² in the first half of this year. Especially start-ups are causing a demand in shared offices – an innovative segment giving the Frankfurt office market an opportunity to grow and ensuring its flexibility.

The high demand, the repurposing and demolition of existing office space as well as a rather modest number of completed real estate projects, caused the vacancy rate to drop to 8.5%. However, construction activity remains to be high. The pipeline is well filled. By the end of 2018, 114,000 m² of office space is to be completed in Frankfurt, of which only about 16% is still available. While the number of available office space is becoming increasingly limited, there is still room on the market.

It is likely that Brexit will have an impact in the medium term. Currently, the political developments in Great Britain are unpredictable and thus, many market participants are awaiting the outcome of the negotiations. However, it can be predicted that Frankfurt will be one of the Brexit winners.

The strong momentum of the Frankfurt office market is likely to continue throughout the second half of the year. The persistently high demand and shortage in office space located at the city centre could lead to an increase in prime rents. Nonetheless, national and international investors are interested in attractive investment opportunities in the Rhine-Main area. Frankfurt continues to be a focal point.”

Andreas Trumpp MRICS, Head of Research Deutschland, Savills Investment Management

“The outcome of the negotiation process for Great Britain’s departure from the European Union will determine the future of other Financial Centres such as Frankfurt. In 2017, the Frankfurt Office Market was marked by record results, even without Brexit-related relocations. An upward trend that persists in the first half of this year. The dynamic of Frankfurt and the Rhein-Main-Region is beneficial to real estate investors, which is amongst the reasons of why Frankfurt moved up 4 places to the 17th most dynamic city in Europe in the recently published Savills IM Dynamic Cities Index. The Main metropolis benefits from its excellent international train and airport infrastructure, above average public transport system and digital network on the local, national and international level. Real estate investors will find investment opportunities in every size category, real estate segment and risk profile. The Financial Centre Frankfurt offers unique investment opportunities that other German cities can hardly provide.”

Markus Kullmann, Team Leader Office Leasing Frankfurt am Main, JLL

“The Frankfurt Office Market reached a strong sales momentum midyear. With a take-up of 260,000 m² a comparison to the previous year (+ 9%), and both the 5- and 10-year average (+ 28% bzw. + 14%.) highlights the outstanding performance. Frankfurt has reached its third-best half-year take-up volume in the past ten years. While large scale rentals of over 10,000 m², such as the rental by the FAZ in the first quarter, do not occur every quarter, we are highly confident that the second half of the year will yield some top lettings – at prime rates. Companies seeking to hire or keep high-calibre personnel are willing to pay prime rents for excellent properties in top locations. Since the dynamic of demand continues to be high, I am confident that take-up will reach 575,000 m² in 2018.

An issue with which actors will be confronted on Frankfurt’s real estate market: vacancy does not necessarily mean vacancy. Available space does not meet the requirements in location, amenities, leasing period and rent. Meanwhile, the vacancy rate is at 7.3 %, with tendency to decrease to 6.8% by the end of the year. As quick reminder: The highest quote was at 17.9 % in 2006. From 2011 (15%) onwards, it gradually declined.

The urgently needed vacant office space did not become available on the market in the second quarter. This is unlikely to have changed by the end of the year. The supply in completed office space of around about 10,000 m² that will become available on the market in the next months is rather modest. I expect a notable relief to hit the market in 2020. By then, 485,000 m² could be constructed.”

Hubertus Väth, Geschäftsführer, Frankfurt Main Finance e.V.

“The high level of leasing activity in Frankfurt and the sinking vacancy rate show that the real estate market in the Financial Centre is booming. The extraordinary quality of life, excellent infrastructure, high concentration of innovative companies and the strong global commercial network make Frankfurt and the Rhein-Main Region one of the most popular destinations international firms. Frankfurt is able and ready to accommodate the numerous financial services firms relocating to Frankfurt from London due to Brexit.”

Financial Centre Frankfurt welcomes new financial institution – Chinese CICC will be based in Frankfurt

The China International Capital Corporation (CICC) has decided to establish a continental European office in the Financial Centre Frankfurt. The Beijing-based investment bank has been listed on the Hong Kong Stock Exchange since 2015. Alongside CICC, more than 24 banks have chosen to relocate their European headquarters to or expand their capacities in the Financial Centre Frankfurt since the Brexit referendum two years ago.

“We are extremely delighted by CICC’s choice in location,” says Hubertus Väth, Managing Director of the Financial Centre initiative Frankfurt Main Finance e.V. “With the opening of the CICC office in Frankfurt, the leading investment bank from the world’s second-largest economy is now represented in the Financial Centre. We see this as another glowing affirmation of the high quality of the Rhine-Main region. CICC’s decision confirms that the city’s strong appeal extends far beyond Europe and can attract financial institutions from Asia, a region whose impressive significance continues to grow,” comments Väth.

Just recently, the Chinese bank, Essence Securities, chose to establish its base in Frankfurt. The Frankfurt-based China Europe International Exchange (CEINEX) was a decisive factor for both Chinese financial institutions. A fact that is clear to CHEN Han, Co-CEO of CEINEX.

“We are convinced that the city will become the leading Financial Centre in the Eurozone, which is why we came to Frankfurt. The city is the ideal stepping stone for Chinese financial institutions, who plan on establishing a foothold in Europe or seek to expand their market presence,” says Dr. CHEN. “We are happy and proud that we could play a significant role in attracting an important institution like CICC to Frankfurt.”


About Frankfurt Main Finance

Frankfurt Main Finance is the voice of the leading financial centre in Germany and the euro zone, Frankfurt am Main. The initiative has more than 50 members including the State of Hesse, the cities of Frankfurt and Eschborn, and dozens of prominent actors in the finance sector. Through their membership and engagement, they all demonstrate their close relationship to Frankfurt and desire to position Frankfurt amongst the top national and international financial centres. Frankfurt Main Finance leverages the influence of its members to advocate for the Financial Centre Frankfurt and provide high-caliber dialogue platforms. For more about Frankfurt Main Finance and its members, please visit www.frankfurt-main-finance.com.

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About China Europe International Exchange AG (CEINEX)

Based in Frankfurt/Main, Germany, CEINEX is a joint venture established by the Shanghai Stock Exchange, the Deutsche Börse Group, and the China Financial Futures Exchange. As the first market place for RMB-related and China-related investment products in the Chinese offshore market, it acts as a unique bridge between the Chinese and international financial markets. CEINEX is dedicated to providing reliable offshore RMB- and China-related financial instruments to investors, so as to promote RMB internationalization.

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Frankfurt Finance Summit: Challenging times – who is ready to set the pace?

Themes that will be discussed at the 8th Frankfurt Finance Summit:

  • Tomorrows strategies in the financial industry in times of change and uncertainty
  • Euro clearing: an open race
  • Finance beyond digitalisation: Artificial intelligence as the new frontier

Since 2011, renowned international and national experts from the financial industry have gathered at the Frankfurt Finance Summit. Under the motto “Ready, Steady, Go! Who is ready to set the pace in challenging times?”, decision-makers from central banks, stock exchanges, supervisory authorities, banks, insurance companies, politics, business and academia are meeting on 29 May 2018 to discuss current issues faced by European Economy, regulators and financial markets.

This year’s summit evolves around the strategic responses to challenges faced by the financial industry in times of change and uncertainty. Moreover, the future location and supervision of euro-denominated clearing transactions by central counterparties after Brexit will be discussed by leading financial industry experts. Participants will also debate the advancement of artificial intelligence and the potential implications for banks and financial institutions. The event can be watched live via the following link: www.frankfurt-main-finance.com/livestream

„We are pleased that the summit allows us to discuss a wide range of topics with leading experts. The questions to be debated are of utmost importance to the future of the Financial Centre Frankfurt as well as to the entire financial industry,” says Dr. Lutz Raettig, President of Frankfurt Main Finance.

The Frankfurt Finance Summit is a well-established forum that is characterized by the exclusivity and expertise of its attending experts. Amongst the participants are Katharine Braddick, Director General of Financial Services at HM Treasury, Jeremy Browne, Special Representative of the City of London Corporation to the EU, Charles Delingpole, CEO and Founder of ComplyAdvantage, Jeroen Dijsselbloem, Former President of the Eurogroup, former Minister of Finance of The Netherlands, Karin Dohm, Managing Director and Global Head of Government and Regulatory Affairs and Group Structuring at Deutsche Bank, Markus Frank, City Council and Head of the Department of Economy, Sports, Public Safety and Fire Prevention of the City of Frankfurt, Bernd Geilen, Vice-Chairman and Chief Risk Officer at ING-DiBa, Thomas Grosse, Industry Leader Banking and FinTech at Google Germany, Christoph Hock, Head of Multi-Asset Trading at Union Investment Privatefonds, Felix Hufeld, President of the Federal Financial Supervisory Authority (BaFin), Kim Körber, Founder and Managing Director of BETTER ONE, Dr. Jörg Kukies, State Secretary at the Federal Ministry of Finance, Sylvie Matherat, Member of the Management Board and Chief Regulatory Officer at Deutsche Bank, Yves Mersch, Member of the Executive Board of the European Central Bank, Erik Tim Müller, Chief Executive Officer at Eurex Clearing AG, Carsten Mürl, Head of Enterprise Security Solutions Germany at Mastercard, Markus Nigg, COO at ti&m AG, Fabrizio Planta, Head of Markets Department at the European Securities and Markets Authority, JP Rangaswami, Group Chief Data Officer and Group Head of Innovation at Deutsche Bank AG, Dr. Cornelius Riese, Chief Financial Officer at DZ Bank AG, Dr. Thomas Schäfer, Member of the Hessian Parliament and Hessian Minister of Finance, Inken Schönauer, Editor-in-Chief at EURO FINANCE magazin, Professor Dr. rer. pol. Dr. h.c. Udo Steffens, Chairman of the Executive Board at the Frankfurt Institute for Risk Management and Regulation (FIRM), Prof. Dr. Uwe Stegemann, Senior Partner at McKinsey & Company, Francisco Webber, CEO and Co-founder of Cortical.io, Annette Weisbach, ECB Correspondent Germany at CNBC International, and Peter J. Wirnsperger, Partner Cyber Risk Services at Deloitte.

As part of this year’s summit a Frankfurt Finance Market Place will take place at which leading companies of the Rhine-Main region are presenting themselves and which offers networking opportunities.

The next and 8th Frankfurt Finance Summit will take place at Kap Europa located at Frankfurt’s central Europaviertel. The conference will be held in English. Find more information here.

Frankfurt Main Finance

Frankfurt Main Finance e.V. continues to grow and extends its executive board

The Financial Centre initiative Frankfurt Main Finance e.V. continues to grow in 2018. With Reinvent Law GmbH, Fincite GmbH and Accelerator Frankfurt GmbH joining, the initiative gained three new members – raising the number of members to 54. Through their membership the representatives of public administration, science, the financial market and financial technology demonstrate their commitment to the Financial Centre Frankfurt, advocate for its national and international importance and actively take up current finance topics.

The executive committee appointed Andreas Glänzel as managing director with immediate effect to strengthen the executive board. Frankfurt Main Finance is thus reacting to the growing demand for information on the Financial Centre. The 53-year-old banker Glänzel has long-standing experience in the field of financial communication and previously held the position of marketing director at the Deutsche Bank corporation. As managing partner of NewMark Finanzkommunikation he currently supports companies in the field of digital communication. Moreover, he lectures students at the International School of Management on marketing and communication.

“The Financial Centre Frankfurt is on the rise. This is shown by the global demand for information on the Financial Centre Frankfurt and the growing number of our members.”, says Dr. Lutz Raettig, President of Frankfurt Main Finance. “We are proudly welcoming Reinvent Law, Fincite and the Accelerator Frankfurt, who are each seizing the opportunity that digitalisation brings and are thus shaping the future. Andreas Glänzels appointment as managing director is a great addition that allows us to react to new challenges in several ways.”

The new member Reinvent Law GmbH was founded in December 2017 and offers its services as Legal Innovation Hub to law firms, corporate legal departments, legal tech companies and universities. They focus on testing new legal tech solutions live, using the knowledge of experienced entrepreneurs and developing new products in close collaboration with Reinvent employees.

The in April 2015 founded software company Fincite GmbH offers software solutions for digital asset & wealth management. Their platform Fincite.Core is the basis for robo advisory and other asset management products, which enable financial service providers to analyse, monitor and optimise existing portfolios as well as to implement dynamic saving plans – across multiple accounts and deposits. Fincite stands for a new, interconnected finance approach, which prioritises the end customers portfolio performance.

Founded in 2015, Accelerator Frankfurt is an independent accelerator that supports startups becoming ready to enter the German market by connecting them with partners, clients and investors. The startups complete a four-month go-to-market program during which they have access to a shared workspace, conference rooms and other services that are offered by partners. The program focuses on Fintech, RegTech, Cybersecurity, InsureTech, PropTech und Blockchain startups.

Frankfurt Main Finance grows: three new members pledge their support for Financial Centre

The Financial Centre initiative Frankfurt Main Finance is proud to welcome three new members. With the addition of SDG Investments GmbH, niiio finance group AG and Vendôme Associés, the initiative now has more than 50 members. The young companies niiio finance group and SDG Investments join as FinTech members, and Vendôme Associés as a sustaining member.

The association’s members are representatives from research institutes, the financial sector, public administration and the emerging FinTech sector. Through their membership and engagement, they all demonstrate their close relationship to Frankfurt and desire to position Frankfurt amongst the top national and international financial centres. Frankfurt Main Finance leverages the influence of its members to advocate for the Financial Centre Frankfurt and provide high-calibre dialogue platforms.

“We are delighted about the new members and their commitment to the Financial Centre Frankfurt,” say Dr. Lutz Raettig, President of Frankfurt Main Finance. “The growth strengthens the association and lends more power to our voice – a benefit for all members. In turn, we also provide fast, direct access to a prominent industry network.”

Since Brexit discussions began in 2016, Frankfurt Main Finance has been an in-demand conversation partner for the media, reaching more than eight billion potential contacts with its messages. Publications in 93 countries have either conducted interviews with representatives of the initiative or published statements and comments released by Frankfurt Main Finance. In addition to promoting the Financial Centre Frankfurt as a home for financial services affected by Brexit, Frankfurt Main Finance is also an outspoken advocate for the Frankfurt Rhine-Main Region’s emerging FinTech-ecosystem.

Founded in 1987, the new sustaining member Vendôme Associés specialises in the direct recruiting of leaders and experts as an independent HR and Executive Search Consultancy. Headquartered in Paris, they continue to strengthen their presence in Germany, opening a Frankfurt office in 2014. “We are thrilled to join Frankfurt Main Finance and to actively support the promotion of this future-oriented and promising city,” says Anne von Bredow, partner at Vendôme Associés. “We believe Frankfurt can attract even more talents from other European countries once people realize how much the city has to offer in terms of career possibilities, infrastructure and cultural life.”

Digital services for the digital future of banking – that is niiio finance group’s speciality. “Our goal is to position niiio finance group as a strong member of the FinTech Ecosystem in Germany’s leading financial centre and thanks to our membership in Frankfurt Main Finance, hopefully develop valuable synergies with cooperation partners,” says Johann Horch, CEO of the Niiio Finance Group. In addition to the robo-advisor, the young FinTech offers a community platform, API banking tools, tailored consulting and development services, and operating models.

SDG Investments operates a matching platform for financing and investment products based on the United Nations Sustainable Development Goals (SDGs). “We became aware of Frankfurt Main Finance through the SDG Fintech Initiative,” explains Frank Ackermann, director and managing partner at SDG Investments. “From our point of view, Frankfurt, as the most important financial centre in continental Europe, is the right location for our activities. Since we are aimed at institutional investors, we achieve the highest degree of efficiency here. We hope that we will find many supporters among the members of Frankfurt Main Finance.” Through the platform, registered professional and institutional investors will find sustainable investments that meet their individual investment criteria.

Costs of relocating Euro Clearing significantly lower than expected

  • Up to thirty-percent savings for asset managers if Euro Clearing moves to EU27
  • 100 billion USD costs estimated by London Stock Exchange found far too high
  • Maximum costs over five years to be around EUR 3.2 billion

Frankfurt am Main – The discussion on the effects of Brexit on Euro Clearing and its supervision continues to concern experts, practitioners and politicians. A working paper from Frankfurt based asset manager, Union Investment, indicates that relocating Euro Clearing to an EU27 financial centre would result in significant cost savings for asset managers. These savings should be realised in initial margin costs and clearing broker fees which currently account for approximately seventy-percent of the total clearing costs for asset managers. The paper explains that in the long term, the up to thirty-percent savings would compensate for any temporary additional costs caused by a wider bid-offer spread.

Another working paper by the Center for Financial Studies (CFS), an independent non-profit research institute at Frankfurt’s Goethe University, contests London Stock Exchange’s (LSE) estimate and other similar studies. According to the paper’s author and CFS Managing Director, Professor Dr. Volker Brühl, “Due to the fragmentation of the market there may be a temporary increase in costs. However, the costs of up to USD  100bn cited by LSE are not verifiable and are far too high. Basing an estimate on more realistic assumptions, the maximum costs over a period of five years are likely to be around EUR 3.2bn. This is before even accounting for the potential savings that asset management companies could make as a result of the relocation.”

Central counterparties (CCPs) and clearing houses are systemically relevant and critical components for maintaining global financial stability. Any crisis situation would likely require an injection of euro liquidity from the ECB and thus, these CCPs deserve to fall under ECB supervision. “The primary goal of any discussion on Euro Clearing must be protecting stability in European financial markets,” explains Hubertus Väth, Managing Director of Frankfurt Main Finance. “The exaggerated estimates stemming from London are neither constructive nor prudent. While decisions on Euro Clearing should not be made purely on a cost basis, the findings of CFS and Union Investment are reassuring. Should clearing relocate, the Financial Centre Frankfurt would be a competent alternative to London, especially with Deutsche Börse’s Eurex Clear.”

Currently, ninety-percent of euro-denominated OTC derivatives are cleared in London. Following Brexit, the calls to relocate Euro Clearing to a European financial centre under the ECB’s supervision, like Frankfurt, were reborn. In response, estimates from the London Stock Exchange pointed to a cost increase of more than 100 billion USD if clearing were to leave London.

The study from the Center for Financial Studies can be downloaded here.

The study from Union Investment can be downloaded here.

 

The Financial Centres Frankfurt and Astana intend to work more closely together

Frankfurt Main Finance e.V. (FMF) and the Astana International Financial Centre (AIFC) from Kazakhstan signed a Memorandum of Understanding (MoU) on cooperation between the two financial hubs on Friday, 17.11.2017.

The AIFC Governor Kairat Kelimbetov and Dr. Lutz Raettig, President of Frankfurt Main Finance signed the MoU agreement on the premises of the company Economic Development Frankfurt in the presence of the Kazakh Ambassador Bolat Nussupov, City Councillor Markus Frank, Managing Director of Frankfurt Economic Development Oliver Schwebel, and Hubertus Väth, Managing Director of FMF.

An AIFC delegation visited Frankfurt am Main last week. In addition to holding several meetings with Frankfurt Main Finance and FMF members such as German banks, the delegation attended the Astana International Financial Centre Forum within the framework of the Euro Finance Week, where Kairat Kelimbetov and his team presented their extensive plans for the years ahead.

“Astana is a young and ambitious financial centre, with which we have enjoyed a close and friendly relationship for many years,” as Frankfurt Main Finance President Dr. Lutz Raettig described the links to the Kazakh financial centre.

Hubertus Väth sees great potential in the new agreement that has been reached: “There are many different opportunities for collaboration in the fields of infrastructure, training, or internal and external financial centre marketing.”

Frankfurt and Astana will be implementing their joint plans over the next few weeks and months and will thus be making a contribution together towards strengthening their respective financial centres.

Deutsches Aktieninstitut presents its second Brexit position paper and claims: Transitional arrangements now!

The Deutsches Aktieninstitut (DAI) presents its second position paper. The paper on the exit negotiations between the European Union and the United Kingdom complements the first position paper from February 2017 and covers further relevant topics, e.g. clearing, benchmark and rating. In the light of proceeding negotiations, the position paper claims to find transitional arrangements that prevent Europe from a Cliff Edge Scenario.

Under the slogan “Exit negotiations between the European Union and the United Kingdom: Minimise Brexit risks and strengthen the European capital market”, the analyses of financial and capital market legislation and concrete examples from practice, illustrate which topics deserve particular attention due to their significance for business and society in connection with the Brexit negotiations.

No deal is the worst deal for all parties affected

“The United Kingdom’s departure from the European Union will have considerable consequences for the European economy and society”, Dr. Christine Bortenschläger, Chief Executive of DAI mentions in the paper, “It is not yet possible to predict how those will look like in detail since the outcome of the ongoing negotiations between the United Kingdom and the European Union is still completely open. This means that companies are losing valuable time they need to adjust to the new situation.”

Risk and consequences of a hard Brexit can be reduced with transitional arrangements

The third country regimes in financial -and capital markets law won’t serve as a sufficient basis to regulate the relations between the 27 EU-states and the United Kingdom, as the second position paper shows. Therefore, the European Union needs a new and broad trading agreement that complements first transitional arrangements. “Transitional arrangements are of decisive importance to buy more negotiating time, enable businesses to prepare for the new situation, and avert a no-deal scenario”, is one of the first position paper sentences.

Frankfurt Office Market heats up as banks firm up Brexit relocation plans

Analysis from leading real estate firms and investors shows demand and prime-rents in the Financial Centre Frankfurt reach record highs, while the vacancy rate steadily declines to its lowest point in years. Nearly sixteen months after the Brexit referendum, developments in the Frankfurt Office Market clearly reflect Frankfurt’s popularity amongst banks leaving the United Kingdom. As an estimated 10,000 jobs relocate to Frankfurt over the next four years, numerous construction projects will help to meet high demand for premium office space.

Increased demand in the market has driven investor confidence and analysts report a notable increase in transaction volume in comparison to 2016. Additionally, Frankfurt has also seen larger deals exceeding 10,000 square meters as firms seek larger, contiguous office space to accommodate their expanding operations and personnel. Despite increases in demand and prime-rents, the Financial Centre Frankfurt remains competitively priced relative to other European financial centres.

These developments are discussed in detail by the branch heads Frankfurt Main Finance member BNP Paribas Real Estate, José Martinez and Oliver Barth. Additional observations and perspectives are given by real estate experts from KGAL, Savills Investment Management, and Jones Lang LaSalle (JLL).

Download the Press Release as a PDF here

José Martinez and Oliver Barth, Managing Directors and Frankfurt Branch Heads of BNP Paribas Real Estate

The Frankfurt office market is continuing to expand rapidly. With a take-up of 477,000 square metres, it achieved its best result of the last 15 years. This outstanding performance puts the city third behind Berlin and Munich. Remarkably, demand is spread relatively evenly across all size classes and market segments, thus testifying to the broad basis for this demand. On a particularly encouraging note, several large-scale deals in excess of 10,000 square metres emerged again at last. After the shortage of the last few years, they are currently accounting for 20% of total volumes. One of the largest contracts (around 27,500 square metres) was signed by Helaba in Kaiserlei.

Supply is keeping pace with the robust demand of the last two years. Currently, 1.51 million square metres of office space are vacant, down 10% on the third quarter of 2016. However, only around half of this floor space, namely 749,000 square metres, exhibits the high-quality modern fittings being sought by tenants. At 9.8%, the vacancy rate across the entire market has now dipped below the 10% threshold. At this stage,

the extent to which Brexit leaves traces on future trends in the Frankfurt commercial real estate market still remains to be seen. The fact is that, although Brexit is being felt on the Frankfurt market, it is not a dominating factor. BNP Paribas Real Estate is in initial, good and promising talks with potential relocators. The fact that something is going on is also reflected in the deals by Morgan Stanley and Goldman Sachs that have secured substantial floor space in Frankfurt. If all current inquiries in the market coincide with signings by Brexit banks, this could theoretically cause a bottleneck situation in the Frankfurt CBD, where currently only 120,000 square metres of modern office space are available. In fact, in the banking district, only about 66,000 square metres are vacant. An estimated 150,000 square metres are required for the 10,000 employees expected to additionally come to Frankfurt. However, on the basis of total vacancies, Frankfurt would not experience any problem offering suitable office space if push comes to shove, although not all of this would be in the CBD. The situation will be eased by a number of attractive development projects that are currently under construction such as WINX, Omniturm and Marienturm, which will be completed in time in 2018/2019 and still have vacancies.

At this stage, all signs are pointing to continued brisk demand until the end of the year. Accordingly, total take-up for the year as a whole should come to between 750,000 and 800,000 square metres, resulting in one of the best years ever. Simultaneously, we expect vacancy rates to continue shrinking, meaning that rents will probably rise to some degree.

Gert Waltenbauer, CEO of KGAL

Frankfurt can strengthen its post-Brexit role as a leading financial centre and additionally enhance its appeal, as the decision made by a number of London banks to base their EU headquarters in Frankfurt shows. The airport is conveniently located near the city centre and is a genuine Frankfurt asset, the importance of which will continuously increase with growth in trade and European integration. Office buildings in Frankfurt in particular are rising substantially in value as a result. However, what we are also noting is that residential quality has improved in Frankfurt over the last few years and this is having a corresponding effect on the intrinsic value of residential real estate.

Andreas Trumpp, Savills Investment Management

From our point of view, Frankfurt offers a wide range of affordable office space both in the CBD and in B locations and could effortlessly absorb a further 10,000 office workers. The inflow could only be limited by the lack of available housing. In any case, the retail and food sectors would profit from the influx of well-payed bankers. As one of the world’s major financial centres, Frankfurt boasts outstanding accessibility, i.e. an airport which is close to the city and superbly integrated in the public transport system as well as the short routes within the city and the entire region. The local companies, political and research institutions attract highly qualified specialists from all around the world, thus contributing to diversity in the city.

Markus Kullman, Associate Director Office Leasing Frankfurt am Main, JLL

Brexit has reached Frankfurt. Preliminary signings have been completed over the last few weeks.

JLL is in constant close contact with a very large number of companies that expect Brexit to impact some of their business segments. Service providers addressing the financial sector are also exploring the market for suitable floor space. However, the Frankfurt office real estate market is not an unknown quantity for most potential tenants as they already have at least a small representative office in the city.

In addition to an available selection of potential high-quality alternative spaces, they especially appreciate the excellent infrastructure, for example the airport.

After already becoming evident last year, one fact has been confirmed in our recent talks, namely that it is not a question of a full-scale relocation of a large number of jobs from London to Frankfurt but of incrementally building up the necessary capacity. And in the most important cities of Europe. Apart from Frankfurt, Paris, Amsterdam, Dublin and Luxembourg also play a role. We expect around 100,000 square metres of office space to be absorbed above and beyond customary market demand in the wake of Brexit.

True, there are some signs of a shortage of floor space in some parts of Frankfurt. For example, we can only offer a small selection of legacy properties in the traditional banking region. This particularly applies to high-quality contiguous floor space of more than 5,000 square metres. That said, the large number of new construction projects, such as OmniTurm, MarienTurm and the Four project at the former Deutsche Bank site, will push more than 250,000 square metres of new office space onto the market between 2019 and 2022. Accordingly, we do not expect the recent rise in demand to trigger any massive increase in prices in the Frankfurt market in the medium term. At the moment, the top rent is at EUR 37.50/m²/month, the highest among the Big 7 and at a vacancy rate of 8.2%, also the highest among the German real estate hubs. However, in the areas where the focus of the companies in question is located, it is significantly less. Depending on submarket and quality, it may currently only be 4-6%.

Hubertus Väth, Geschäftsführer, Frankfurt Main Finance e.V.

The availability of commercial real estate is the least of Frankfurt’s concerns. Over a period of 5 years, 250,000 square metres of new office space will be created in several new high-rise buildings. Currently, 19 buildings are under construction and 26 in the planning phase in Frankfurt. As it was, there was already need for action in the residential market. Now conditions have worsened. The situation with respect to micro-apartments for commuters and high-rise living is better than with affordable housing for the mass of interested parties. However, the problem is known and there is still some lead time. Accordingly, it should be manageable with combined forces.

The Financial Centre Frankfurt is in the pole position to win banking business from London following the results of the UK’s referendum. Noted for its strong economic and political stability, Frankfurt and the region offer a top infrastructure, a deep talent pool and an extremely high quality of life. Financial services moving to Frankfurt will find a competent, helpful and welcoming regulator in BaFin, who will accept large portions of applications in English. The Financial Centre is already home to more than 150 foreign banks and 75,000 people employed in financial services.

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Six new members join financial centre initiative Frankfurt Main Finance

The financial centre initiative Frankfurt Main Finance e.V. continues to grow. Bain & Company, Deutscher Fachverlag, Skubch & Company and Oliver Wyman join the ranks of supporting members. Two start-up companies, Compendor and Raisin, have joined the initiative as new FinTech members.

With their membership, representatives from public administration, research institutes, the financial market and financial technology express their commitment to the Financial Centre Frankfurt and their dedication to furthering its national and international significance as well as actively reflecting on matters of current interest to the financial services industry.

The initiative is an especially sought-after conversation partner for Brexit-related matters. Since discussions concerning the United Kingdom’s withdrawal from the European Union began in April 2016, Frankfurt Main Finance has reached more than eight billion potential contacts with its messages. Over 1,700 different media in 93 countries have either conducted interviews with representatives of the initiative or published statements and comments released by Frankfurt Main Finance.

“The initiative has been able to convey Frankfurt’s function as a bridge linking the London financial markets with the European Union as an important message internationally,” says Dr. Lutz Raettig, chairman of Frankfurt Main Finance. “Frankfurt Main Finance’s communications highlight the numerous benefits which make the Financial Centre Frankfurt the destination of choice for many financial services companies moving parts of their business out of London.”

At the general meeting, Dr. Raettig thanked Frankfurt Main Finance’s many members and supporters for their commitment and welcomed the new board members. Moving forward, Frank Westhoff will represent the Frankfurt Institute for Risk Management and Regulation on the initiative’s board in lieu of Wolfgang Hartmann. Nick Jue succeeds Roland Boekhout as the representative of ING DiBa. Gerhard Wiesheu will represent Bankhaus Metzler in place of Johannes Reich. Dr. Cornelius Riese will replace Lars Hille as DZ Bank’s representative.

“By assigning their board members, our regular members highlight the significance of the work performed by Frankfurt Main Finance for the Financial Centre. We are thrilled by the great commitment shown by all parties involved who support us with Brexit-related matters as well as the city’s development as a FinTech hub and a renminbi centre,” says Dr. Lutz Raettig.

Baker McKenzie, GFT and Interxion AG will leave the initiative at the end of the year. Accordingly, the association has nearly 50 members engaged in supporting the Financial Centre Frankfurt.