German Property Partners (GPP) has calculated that the volume of investment transactions involving commercial property in Germany’s top 7 locations (not counting buy-to-let-residential) came to a total of some €19.4 bn by the end of the 3rd quarter of 2015. That is an increase of 44.4% compared with the same period a year before. “The volume of transactions rose at all the top 7 locations, especially in Cologne (+122.2 %), Frankfurt (+82.0 %) and Berlin (+69.9 %) where the prior year’s figures were exceeded by large margins,” says Björn Holzwarth
, GPP spokesman, commenting on the market.Transaction volume: Growth in all locations
Brisk trading was most noticeable and concentrated in three markets - Berlin (€4.4 bn), Munich (€4.1 bn) and Frankfurt (€4.0 bn). The four largest transactions announced to date were trades completed in Frankfurt and Berlin. Following the 2nd quarter sale of the Frankfurt properties “Trianon” for some €540m and a 95% stake in the “Eurotowers” for around €455m, the 3rd quarter saw completions in Berlin for the “Boulevard Berlin” shopping centre, sold for some €370m, and a mixed use building, “The Q”, which changed hands for around €330m. Hamburg posted a transaction volume of some €3.2 bn (+31.3%). Several of the city’s commercial properties changed hands for prices in the triple-digit millions range. The volume of transactions in Düsseldorf was €1.7 bn (+6.1%) and in Stuttgart €1.1 bn (+27.4%). The lowest top 7 total was €1.0 bn; this figure for Cologne did, however, represent a year-on-year increase of +122.2%, the biggest leap of all 7 cities.
At all top 7 locations, the most-traded assets were office buildings. Their share of the transaction volume was about 68%; retail assets trailed with 15% of the total. In Düsseldorf retail properties were notably more popular than elsewhere, accounting for 40% of sales. The three biggest retail transactions in the city were the sale of the “Kaufhof portfolio” for about €225.0m, of the “Sevens” shopping mall (Königsallee 56) for some €220.0m and of the “Düsseldorf Arcades” (Friedrichstrasse 133) for some €190m.Largest known transactions in Germany’s top 7 cities; 1st to 3rd quarters of 2015
Returns: Further slide in premium returns
| Location || Property || Investor || Vendor || Pur. Price |
| FAM || Trianon || NorthStar Realty Finance || Madison International Realty || 540 |
| FAM || Eurotower (95%-share) || IVG || RFR Holding || 455 |
| BER || Boulevard Berlin || Klépierre || Corio || 370 |
| BER || The Q || Tishman Speyer || Pontegadea/Banco Santander || 330 |
| MUN || Siemens Campus || Pramerica RE Investors || HIH/RFR Holding || > 300 |
| HAM || Berliner Tor Center || Zurich Versicherung (insurance) || Morgan Stanley || 269 |
Year on year and without exception, premium returns for office properties in the top 7 locations have fallen. The lowest returns on office investments were reported in Munich at 3.75%, followed by 4.20% in Berlin and 4.30% in Hamburg. In Düsseldorf, Cologne and Stuttgart premium returns of 4.50% are still attainable for office properties. The biggest drop in premium returns for office properties was in Berlin, which shed 55 basis points, whereas Hamburg reported the lowest decline with a drop of 20 basis points. “Compared with the second quarter of 2015, only Berlin and Cologne have seen a further decline in premium returns on office assets during the third quarter. The situation has not changed in the other locations. But if the low level of interest continues, returns have not yet touched the bottom,” predicts Holzwarth
.Investors: International players prefer Cologne and Frankfurt
With a transaction volume of €9.3 bn, international investors bought 48.2% of the commercial real estate sold in the top 7 locations. Non-German investors focussed most on Cologne (72.0%) and Frankfurt (57.6%).
The biggest single group of investors buying real estate in the top 7 locations were open-end and specialist funds. In Stuttgart they accounted for 68.3% of purchases, in Munich for 56.2%. In Frankfurt pension schemes and funds played the biggest role, with a 22.4% share. In Hamburg asset managers/portfolio holders composed the biggest group (23.3%).
The vendors vary from city to city. In Hamburg open-end funds were predominant (29.9%), in Berlin private investors/family offices (18.8%); owner-occupiers/corporates were strong in Düsseldorf (24.3%) and Cologne (19.0%), asset managers in Frankfurt (20.7%) and project developers featured in Stuttgart (21.3%) and Munich (33.9%).Outlook: 2015
Holzwarth: “Many investors, including those from outside the country, regard Germany as a safe haven, where capital can be parked as securely as possible. However, large amounts of cash and a dearth of investment products will continue to result in price rises. Yields will therefore be squeezed further. By the end of the year 2015 we are expecting the top 7 locations to attain a combined transaction total of some € 26.0 bn, topping the prior year's result of €21.6 bn.”