Invest Berlin 3Q2018

Despite a steep fall in sales, overall result is good

Press release | Berlin

In the 3rd quarter of 2018, trading in commercial real estate in Berlin continued to gather momentum. Posting €1.7bn, the 3rd quarter result was the second-highest recorded to date at the end of nine months. Grossmann & Berger, a member of German Property Partners (GPP), calculates that a total of €4.1bn was paid to buy commercial properties in Germany’s capital city. In the same period of the prior year an outlier transaction ‑ the sale of the “Sony Centre” for some €1.1bn ‑ pushed the result to unusual heights, and this year’s total to date is nearly one third lower. “However, several transactions are in the process of finalization. If business continues as brisk as before, we expect the volume of transactions to equal if not surpass the five-year average of €5.5bn,” says Holger Michaelis, managing director of Grossmann & Berger.
Big-ticket trades comprise over half of transaction volume
Two of the three biggest agreements in the first nine months of 2018 were signed in the 3rd quarter. One of the two was the sale by Capstone of the Zalando Campus (Valeska-Gert-Strasse 2, Friedrichshain), purchased by Hines for a Luxembourg fund at a cost of €235m. The second-biggest transaction in the 3rd quarter was “Das Schloss” (Schloss Strasse 34, Periphery South) which Deka-ImmobilienEuropa bought from HFS Immobilienfonds 10 for €225m. These trades were topped only by the 2nd-quarter sale of the Hilton Berlin hotel for €297m. 13 properties were sold at a price of over €100m during the first three quarters of 2018, comprising 57% of the total volume of transactions (€2.4bn). Second place was taken by trades in the €51m to €100m category, whose share amounted to 18%.
Retail properties second most popular asset
Amounting to 52% of the total (€2.15m) office properties were by far the most-traded class of asset in Berlin. The biggest agreement in this category was the sale of the Zalando Campus, as noted earlier. Another major trade was the SAP building (Rosenthaler Strasse 30, Mitte) which DIC Office Balance I, a specialist fund, sold to RFR Holding for a nine-figure sum. In the ranking of trades by asset class, the sale of the shopping centre “Das Schloss” propelled retail properties into second place with a share of 16%. Mixed use properties comprised 11% of the market due to the sale of several big commercial real estate assets.
Prime yield slightly down
Prime yields on Berlin properties have softened very slightly year on year. The prime yields on office properties and commercial buildings fell by 0.10 percentage points each to 3.0% and 2.90% respectively.
Zalando gives Friedrichshain unusual boost
Almost half of the volume of transactions for the first three quarters was distributed among four sub-markets. With a share of 14.4% of total trading volume, Mitte supplanted Periphery North (12.1%) which had been the dominant sub-market in the 2nd quarter. One reason for the change at the top was the sale of the SAP building noted earlier. The following places were taken by Friedrichshain with 11.1%, and Mitte 1a with 10.8%, a sub-market that is traditionally much sought-after. Friedrichshain owed its good result to the Zalando transaction described earlier.
International investors less active
In the first three quarters of 2018 international investors have been far less active on the Berlin market for commercial properties than they were a year ago. As buyers, their share of the transaction volume fell by 38% and as sellers by 40%. “However, this is to be seen in relation to the overall fall in the volume of transactions. By percentage share of the market, the presence of international investors has altered by much less,” explains Ulrich Denk, investment consultant and researcher at Grossmann & Berger. There was no change in the ratio of international buyers (65%) to overseas vendors (46%).
Fund managers buying and selling very vigorously
Accounting for a share of 24% of the market, fund managers were the biggest single group of both buyers and vendors. Private equity funds/opportunity funds were also major players, taking 12% and 11% of the market respectively, on a par with project developers and listed property AGs/REITs. With a share 16%, fund managers were the biggest group of vendors. Closed property funds were also well represented on the selling side of the equation, with 10% of the market.
The full market survey will soon be available to download from our website.

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