In line with our expectations, commercial construction turned the corner in 2017.
After declining by around 5% from 2012 to 2016, investment recorded a year-
over-year increase of roughly 2 1⁄2% in 2017. Led by the sharp steady rise in the
number of employees subject to social security contributions, office employment
and hence demand for office space also picked up.
More than 40% of the
employees subject to social security contributions in Germany, and around 50%
in major cities, are working in offices. Courtesy of the thriving labour market,
demand looks set to rise further in 2018. On the supply side, vacancies are
hence likely to remain on the decline, which ought to stimulate investment. In
some regions, bottlenecks already exist today – for the first time since the
reunification boom. Looking ahead, space should also become scarce in the
major office property markets, Frankfurt and Düsseldorf. After rising markedly on
the heels of the dotcom boom, vacancies are meanwhile on the retreat. Thanks
to the Brexit, demand for office space in Frankfurt has recently picked up visibly,
following sluggish demand growth in 2016. The German office market ought to
gather further steam in 2018, as the number of office employees is likely to rise
further, whilst vacancies look set to continue their downtrend in many cities.
Driven by the persistent boom in online retail sales, demand for logistics
properties ought to pick up, partially at the expense of retail industry, which has
suffered from weak growth impulses in recent years.
On the whole, commercial
construction looks set to gather momentum, given the marked rise in new orders
in 2017 and building permits near their all-time highs of the early 1990s. Against
this backdrop, we expect commercial construction investment to edge up by
somewhat more than 2 1/2% in 2018.