Office Real Estate

The trend already evident in recent years continues: Demand is increasingly focused on high-quality, flexible office space in attractive locations. At the same time, two major leases—each exceeding 10,000 square meters—were already recorded in the first half of 2026, whereas only one deal of this magnitude was concluded in all of 2025.

Alongside the traditional office market, public and educational uses are also gaining importance in the revitalization of large-scale downtown properties. A recent example is the lease of approximately 18,000 square meters in the former Galeria Kaufhof building by the Region of Hanover for the Cora-Berliner Vocational Schools. Even though these spaces are not included in office space turnover, the project illustrates the structural transformation of inner-city real estate and the growing importance of alternative repurposing concepts.

Demand Is Focused on High-Quality Space

Companies’ requirements for office space continue to evolve. Today, the primary demand is for modern, energy-efficient, and flexible buildings that offer a high quality of environment, good public transportation connections, and state-of-the-art technical amenities. At the same time, space is being used more efficiently, so that the average space requirements of many companies are currently continuing to decline.

In Hanover, the highest willingness to pay is not limited exclusively to traditional downtown locations. High-quality new-construction office properties on established arterial roads are now also achieving top rents at comparable levels. Today, the key factors for successful leasing are less the traditional location category and more the building’s quality, accessibility, and usage concept.

Older existing buildings in need of modernization, on the other hand, are coming under increasing pressure. Especially in outlying areas, marketing times are lengthening, while the volume of sublease listings is increasing.

Vacancy Rates Rise, Rent Trends Vary

Vacancy rates continue their moderate rise. By the end of 2026, a vacancy rate of around 6.2% is expected in the city of Hanover, while in the surrounding area it is likely to rise to about 10.2%. Despite the increasing availability of space, the rise remains significantly more moderate than in many German Class A locations, for which an average vacancy rate of 8.8% is forecast.

The picture for rents is mixed. While prime rents in the city center are declining slightly to around 23.50 euros/sqm following the significant increase of the previous year, the average rent in the city center is rising marginally to about 16.80 euros/sqm. The slight decline in prime rents is less a reflection of waning demand in this segment and more attributable to the fact that fewer exceptionally high-priced transactions have been recorded to date.

Completion Activity Declines

Following the particularly high number of completions in 2023—due in large part to the completion of the Continental corporate headquarters—the volume of new construction in the Hanover region has normalized. As early as 2025, only about 60,000 square meters of office space were completed through new construction and extensive renovations. A further decline to approximately 40,000 square meters is expected for 2026.

A look at the project pipeline also indicates that this trend is likely to continue. Due to rising construction costs and more stringent financing conditions, project developments are being implemented more selectively. Accordingly, a significantly lower volume of completions is expected in the coming years compared to the beginning of the decade. As a result, supply pressure is likely to ease in the medium term, limiting any further increase in vacancy rates.

Investment Market Slowly Stabilizing

The investment market for office real estate is also showing further signs of stabilization. In 2025, transaction volume increased slightly year-over-year to approximately 124 million euros. While institutional investors remain cautious, the price-discovery phase appears to be increasingly coming to a close. This is indicated both by the already significantly higher investment volume in the first half of 2026 and by the now only marginal increase in the net initial yield for office properties in prime locations—up by 10 basis points to around 5.1%.

The example of the “Close” office project in Expo-Park also illustrates the market’s increasing differentiation. Even high-quality new construction can come under economic pressure if there is a lack of pre-leasing or insufficient demand. Building quality alone is no longer sufficient today; a viable usage concept, a space layout in line with market conditions, and the right location are just as crucial.

Outlook: Differentiation Continues

Hanover’s office market is likely to continue to diversify in the coming years. Modern, high-quality office space in prime locations remains in demand, while older existing buildings without up-to-date amenities and usage concepts are coming under increasing pressure to adapt. At the same time, the decline in new construction activity suggests that the further rise in vacancy rates is likely to slow in the medium term.

Macroeconomic developments and companies’ willingness to invest remain crucial for the market’s future trajectory. However, the trend toward high-quality, flexible, and sustainable office space is likely to continue regardless of economic fluctuations and will continue to shape the Hanover office market in the future.