Low vacancy rate and rising rents in paradise

Jena Economic Development Agency publishes office market report 2019

Falling vacancy rates, declining take-up coupled with high demand and rising commercial rents - these are the key findings of the new, fourth Jena Office Market Report. The commercial real estate report, which JenaWirtschaft publishes annually together with the Chair of Economic Geography at Friedrich Schiller University Jena (FSU), the Department of Urban Development and Environment and a working group of commercial real estate agents, highlights key market indicators and developments and is aimed at politicians, investors and companies.

According to Markus Henkenmeier, Deputy Head of Jena's Economic Development Agency (JenaWirtschaft), things are getting tight in the City of Light: "Jena's office market needs a larger supply for prospective tenants so that the conditions for good economic development can continue to be met." With a vacancy rate of 1.8 percent (2017: 2.1 percent) and an increase in the average rent of EUR 1.10 per square meter to the current average of EUR 9.20 per square meter, the local supply of office space is too low. A so-called fluctuation reserve of at least 3 percent would be necessary.

New construction projects as important location decisions

According to the authors, the shortage of space is unevenly distributed: For example, only 0.8 percent of office space in the Campus axis was vacant, compared to 4.2 percent in Göschwitz. However, almost two thirds of this space was no more than 250 square meters, while large spaces in particular - i.e. 250 square meters or more - were difficult to find. According to Henkenmeier, however, these large spaces are particularly in demand from the fast-growing companies in Jena's high-tech sectors. The knowledge-intensive sectors and the IT industry in particular pay a great deal of attention to location and facilities; here, the short supply is increasingly leading to problems in finding space. The result is longer search times and higher rents. "The space required for expansions and new relocations can only be realized to the extent needed through new construction and conversion. This is why new construction projects, for example on Steinweg or in Neulobeda, are important and correct location decisions," confirms Christian Gerlitz, Mayor of Jena and Head of the Department for Urban Development and Environment.

Rising average rents and demand-oriented planning

At 18,150 square meters, 3,390 square meters less space was taken up in 2018 compared to the previous year. At the same time, rents rose to an average of EUR 9.20 per square meter; in individual cases, office rents were as high as EUR 18 per square meter. For large-format space in a good location - i.e. in the city center or close to the city center - and with high-quality fittings - e.g. air-conditioned - office space was offered from EUR 11 per square meter. Jena's high-tech sectors in particular are among the most important demand groups, as a good environment is a decisive factor for employees: "An urban, open environment and modern working environments, such as open spaces, have become important location factors for companies in the increasing competition for skilled workers," says Prof. Dr. Sebastian Henn from the Chair of Economic Geography at Friedrich Schiller University Jena. The knowledge-intensive sectors are increasingly moving towards central office locations, while the health and social services sector is seeking proximity to other companies in the same sector and is on average significantly more price-sensitive. Forward-looking planning is important here, as Christian Gerlitz, Head of Urban Development, also knows: "Jena has the potential to continue to grow economically. When it comes to office and commercial space, we need to take an even closer look at the needs and options at the location in future."

Modern office working environments in co-working spaces

In addition to the distribution of office space through sales or long-term leases, workspaces and infrastructure are also increasingly being made available for temporary office use in Jena. These so-called co-working spaces offer a wide range of services, from workstations to further training opportunities for office users. "Modern forms of work organization and the increase in project-based working methods are global trends that are becoming increasingly important for companies and locations," says Professor Henn. The current office market report devotes a separate chapter to co-working spaces in Jena. In 2018, there were a total of three locations offering such spaces, with another one in planning. "Sustainable business locations also include modern office working environments, which is why the expansion of office space in this segment is a logical and important development," emphasized Gerlitz, Head of Urban Development.

But what else will happen in Jena in the future? One thing is certain: companies want to grow and will continue to do so, as shown not only by the current office market report but also by the company survey conducted on behalf of JenaWirtschaft. "Alongside the shortage of skilled workers, Jena's companies consider the lack of available space to be the biggest challenge in Jena. We have to address this," says business promoter Markus Henkenmeier.

Constantly increasing pipeline volume

Jena's office space supply is expected to increase. However, of the approximately 74,170 square meters of pipeline space, only around 18 percent is rented out - the rest is built by companies for themselves. According to the study, this will only slightly relieve the office market. A larger amount of rental space is being created at the Steinweg Tower and in the IT-Paradies extension. "The developments of recent years clearly show the importance of active political and investment-friendly action in order to continue to create positive conditions for the economically necessary growth in Jena," says Professor Henn.

Key figures 2018 at a glance: