Frankfurt’s skyline darkens as old office buildings sit vacant
IN ONE of Frankfurt’s most central neighbourhoods, a stone’s throw from the city’s main train station, a 19-storey highrise building once occupied by DZ Bank’s Union Investment unit has been vacant for more than four years.
The Brutalist tower, which opened its doors in 1977, is one of the more striking victims of a dynamic that has accelerated in the aftermath of the Covid pandemic. With high-profile tenants increasingly opting for newly built spaces – and renovation costs climbing – Frankfurt’s older buildings are being left behind.
Rising office vacancies are a problem throughout Germany. Yet in the country’s banking capital, one of the few cities on the continent with a business district skyline, these empty spaces are increasingly visible.
Vacancy rates in Frankfurt grew from nearly 7 per cent in 2019 to just below 10 per cent in the third quarter of last year, according to a December report published by real estate broker Cushman & Wakefield. Among the city’s office towers alone, this number could grow to as much as 20 per cent by 2028, according to the broker.
While total newcomers to the market are rare, it’s common for banks and law firms already established in one of Frankfurt’s skyscrapers to periodically move office. What changed after Covid – alongside Germany’s economic slowdown and a rise in people working from home – is that most prospective tenants started prioritising smaller and newer offices over bigger spaces in need of repair.
“Tenants are specifically looking for top spaces in prime locations,” said Tina Reuter, Cushman’s head of Germany, “and most accept higher rents per square metre because they’re reducing their rental space at the same time”.
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Meanwhile, the offices they’re abandoning are often in need of extensive renovations, making it difficult to find new tenants.
While owners have been aware of growing demand for ESG-compliant properties and the vacancy risks facing older office towers, not all of them have taken the steps to upgrade their buildings, Cushman’s Reuter said. Moreover, “owners who have already included refurbishments in their business plans are now faced with the challenge of increased construction costs”, she said.
Almost two-thirds of Frankfurt’s office stock will be more than 20 years old by the end of the decade, the Cushman & Wakefield report shows, a point after which extensive renovations are usually needed.
On top of tenants’ demands, urban planning requirements have evolved as well, said Marcus Gwechenberger, who heads Frankfurt’s building and planning department. “We want towers to get away from the dead zones on the first floors, which especially older buildings have, and create spaces that are open to the public instead.”
In order to meet all these requirements, owners now have to invest much more than they did before the pandemic. Construction costs for office renovations jumped by almost 50 per cent from the end of 2019 to November 2024, according to data published by Germany’s Federal Statistical Office.
Renovations are frequently delayed while a property is fully rented out. A major tenant’s departure, however, often leads to a rude awakening, said Jan Duedden, managing partner at Frankfurt-based real estate investment advisory Arcida Advisors.
“Tenants moving out is the worst-case scenario, because then there is no more rental income to pay debt,” Duedden said. “This is when the decline in the value of the property is most significant.”
That’s what happened to the Korean owners of Frankfurt’s Trianon tower last year after the building’s flagship tenant, DekaBank Deutsche Girozentrale, announced plans to give up the roughly 20 floors it had been renting in the 45-storey tower. The owners defaulted on a loan linked to the property in June, and six months later, the German lender moved its headquarters to the newly built Four highrise, just a block down the road.
Other major shake-ups are expected to follow. Early last year, the European Central Bank’s (ECB’s) Banking Supervision arm announced plans to move its headquarters from Frankfurt’s Eurotower, a ‘70s-era construct, by the end of 2025 when its lease expires. Following that decision, Eurotower’s owner, Taiwan’s Fubon Financial Holding, marked down its investment by around NT$6 billion (S$250 million).
The ECB unit’s future headquarters, the Gallileo tower, is also more than 20 years old, but is currently undergoing a 180 million euro (S$353 million) refurbishment.
Germany’s fourth largest bank, Commerzbank, is starting to move staff out of ageing buildings scattered across Frankfurt to consolidate operations in a highrise that should be ready by 2028. Dutch lender ING Group is weighing whether to move its German headquarters to a newly built tower outside the banking district after its lease expires that same year, according to a person familiar.
For lenders, ageing office stock that was bought during the cheap money era and will soon need refinancing is an unpleasant reality hanging over their balance sheets, said Arcida’s Duedden. “When we say that we have weathered this crisis, we overly focus on project developments, but the real crisis is yet to come,” he said.
In cases where owners lack the motivation or means to put new money into a property, banks should step up and make the investments themselves, he added – especially since long-term vacancies and zombie construction sites can drag down the value of neighbouring properties.
They also make a city less pleasant to be in. “Vacancy naturally has an impact on the store, the restaurant, the office space on the other side of the road,” said Gwechenberger of Frankfurt’s building and planning department. “It makes a difference whether I look out of my office window at an attractive environment.”
While property owners grapple with these issues, the Union Investment tower remains abandoned. Four years after Frankfurt-based developer Groß & Partner acquired it, promising to renovate by 2026, the only indication that they might make good on their word is a banner stretched across the building’s entrance, announcing that construction will begin soon.
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