The latest figures for the first half of 2014 from Grossmann & Berger Berlin reveal that the volume of investment in commercial properties in the capital has remained slightly below the prior year’s level and stands at some 1.24 bn. € at the close of the 2nd quarter. Year on year, total turnover fell by 13.4%.
Mitte the Outstanding District
As was the case in the same period last year, the “Mitte” section of the market accounted for the greatest volume of investment. About 31% of the total volume of investment in the 1st half year was concentrated in the “Mitte” section of the city. The Mitte section of the market posted turnover of around 390m €, which included transactions such as the purchase of “Hackesches Quartier” for over 150m € and the Mosse Centre which cost over 90m €. In second place behind Mitte one finds the Leipziger Platz/Potsdamer Platz sub-market, which accounted for around 17% (about 200m €) of the turnover. This situation had much to do with a project developer who purchased the “Cassaforte” (acquired from Generali) and Leipziger Platz 14/15 (bought from Hoechst Pensions Fund) with the aim of integrating these three buildings into the “Mall of Berlin” shopping centre. In the Mitte section of the market, the biggest transactions in the 1st half year were the sale of the office and shop complex “Hackesches Quartier”, which Deka/WestInvest InterSelect bought for over 150m € from a specialist IVG property fund, the sale by a private Romanian investor of the “Mosse Centre” office block on Schützenstrasse to Real I.S. for more than 90m € and an association’s acquisition of a property for their own occupancy. “The investment market could have performed better in the first half of the year if a larger number of attractive properties had been on sale in Berlin,” concludes Holger Michaelis, managing director of Grossmann & Berger Berlin.
Office Properties Remain Popular
Accounting for 77.3% of the total volume of transactions, office properties remained the most popular asset class in the 1st half of 2014. The transaction volume in this segment was 960m € and thus some 29% higher than in the 1st half of 2013 (746m €). Retail properties placed second in the 1st half of 2014 with transactions totalling about 128m €. Very few hotels were sold, so that this segment accounted for a mere 6.8% of the total, or 84m €. Premium returns for office and retail properties remained stable in the 1st half year at 4.75% and 4.5% respectively.
Foreign Buyers and Sellers Out of Synch
In the first half of the year foreign investors were appreciably more reticent about selling their commercial properties in Berlin than in the same period a year ago. International investors were the purchasers of some 23% of the volume bought and sold, and sellers of about 32% of the total. The international investors comprised funds, REITs and asset managers. “Foreign Family Offices are especially active on the selling side of the market just now,” says Ulrich Denk, investment consultant and researcher at Grossmann & Berger in Berlin.
Open-end/Specialist Funds Biggest Buyers
Taking a 23% share of the transaction volume, open-end funds head the list of property sellers; this is due, above all, to the sale of the Hackescher Markt. They are followed by project developers with a share of around 19%. The developers focussed mainly on buildings with potential, either for development or demolition/new build rather than empty sites. The next biggest groups were the closed funds, owner-occupiers and private investors whose shares of the total transaction volume reached 14.2%, 13.5% and 12.0% respectively. The other types of investors, such as REITs, insurance companies, asset managers and pension funds each accounted for less than 10% of the total volume of transactions.
Private Investors Biggest Sellers
Largely due to the sale of the huge Mosse Centre property, private investors formed the biggest single group of sellers, accounting for a share of some 20% of the volume of transactions. This group was followed by project developers and open-end/specialist funds with shares of 18% and 15.3% respectively; in each case large, single transactions were responsible for the ranking. Other groups of sellers, including closed funds, opportunity/equity funds, insurance companies and REITs each accounted for less than 10% of the total transaction volume.
Demand Remains High in 2014
The first half year closed with a result between the 1.5m € seen in the prior year and the 900m € returned in what became the record year of 2012. “Since alternatives are lacking, investors will continue to play a very active role in Berlin’s commercial property market. The final result for Berlin in 2014 is therefore also likely to pass the 3 bn. € mark,” comments the investment team at Grossmann & Berger Berlin.
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