In the wake of an excellent result of some €4.0bn at the end of the prior year, the market for commercial property investments in Berlin kicked off the year 2015 with a magnificent 1st-quarter result of €1.1bn. Compared with the 1st quarter of 2014 the volume of turnover rose by about 125%. “This excellent start to the year compared with the prior year is above all due to French mall operator Klépierre taking over the shopping centre manager Corio. Because there was no new increase in land acquisition tax as happened in early 2014, there was no especial surge in activity in the run-up to the New Year. We expect to see the market develop well with a turnover volume close the €4.0bn seen in the prior year,” predicts Ulrich Denk
, investment consultant and researcher at Grossmann & Berger Berlin.
Southern periphery has greatest volume of sales
In the 1st quarter of 2015 “Periphery South” registered a larger share of investment transactions than any other sub-market. As a result of the Dutch shopping mall operator Corio being taken over by the French company Klépierre, the “Boulevard Berlin" shopping mall on Schloss Strasse in the Steglitz district also changed hands. The purchase price is thought to have been around €350m and thus represents the biggest 1st-quarter transaction so far registered in Berlin. Apart from this special item, investors focussed on traditional inner city locations, and so the second-biggest single transaction concluded - the sale of the “Uniqlo House” (formerly Nike-Town) - was on Tauentzien Strasse, its price of over €100m accounted for some 9% of the total volume of investment in the 1st quarter. Altogether the sub-market "Ku'damm plus side streets" took some 19% of the total market. The "Mitte 1a" sub-market accounted for nearly 12% of the market thanks to the sale of the office/shop property at “Unter den Linden 74” for over €70m and of various other properties. A little behind that came the “Tiergarten” sub-market with some 10% (€106m) of the total and “Friedrichshain” with about 8% (€82.5m).
Some premium returns continue to slide
The "Boulevard Berlin" and the sale of the “Uniqlo House” were special factors that catapulted the retail segment ito the top of the "most preferred assets" category with a share of some 53% of the total volume of transactions in the New Year, for a total of around €580m. Unlike the prior year, retail thus edged office property assets, with a share of some 31% (€344m) out of the top slot. Hotels closed the quarter in third place with a share of around 10% and a transaction volume of about €110m. During the 1st quarter of 2015 premium returns on office properties started to soften a little and noted at 4.6%, whereas the returns on retail properties remained unchanged at stable 4.5%.
Almost 90% of sellers are from outside Germany
In the 1st quarter of 2015 foreign investors played a huge role on the market for commercial property investments in Berlin, figuring both as buyers and as vendors. Whereas international investors were the purchasers of some 67% of the volume bought and sold, as sellers they accounted for a staggering 88% of the volume. Most of the international investors are REITs, asset managers and private individuals from European countries such as France. “Even if we discount the special effect attributable to the “Boulevard Berlin” the Berlin market is attracting increasing flows of foreign capital,” concludes Denk
Some 40% of investors and vendors are REITs
Accounting for a good 38% of the transaction volume (€421m) the buying side of the market was dominated by REITs, a result, first and foremost, of the “Boulevard Berlin” transaction. Asset managers and private investors followed at a distance with respective shares of some 19% (€209m) and 18% (€202m) of the total volume of transactions. Open end funds, taken as as group, accounted for only 13% of the transaction volume. Thanks to the big-ticket sale “Boulevard Berlin” the REITs also took first place in the ranking of vendor groups, accounting for some 40% of the volume of transactions (€440m). They were followed by project developers (about 18%), private investors (around 12%) and banks (about 10%).
“The ongoing glut of cash and the favourable economic environment will continue to fuel commercial property investment activity in Berlin, although the shortage of suitable products will be a limiting factor,” says Holger Michaelis
, managing director of Grossmann & Berger Berlin, summarizing the situation.
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