Invest Berlin 1Q2018

Weaker, but nevertheless third-strongest start to a year

Press release | Berlin

The market for investments in commercial properties in Berlin started the 1st quarter of 2018 in sluggish style, ending with a figure 38 % lower than in the previous year. Despite that, trading in Berlin properties reached a total of €860m, the third-highest figure Grossmann & Berger has ever noted for a 1st quarter in Berlin. “The weaker start to the year is clearly due to the fact that not enough properties were on sale. However, more real estate has since come onto the market, so that business is improving and results will be noticeably better by the end of the first half year. Nevertheless, the annual volume of trading is likely to fall below the previous year’s total to about five billion euros, because buyers are no longer willing to pay whatever is asked and prices have reached a level that calls for more thorough investigation prior to purchase,” says Holger Michaelis, managing director of Grossmann & Berger, member of German Property Partners (GPP).
Most transactions in middle price range
Whereas the volume of transactions fell appreciably, by 38 %, the actual number of sales differed by 14 %. Instead of 29 properties in the 1st quarter of 2017, 25 changed hands in the same quarter this year. 43 % (€370m) of the transaction volume comprised sales between €26m and €50m, and a quarter (€214m) was made up of properties that sold for more than €100m. The biggest year-on-year growth figure - 92 % - was noted for real estate with price tags ranging from eleven to €25m, which accounted for 16 % (€138m). Among the biggest transactions that Grossmann & Berger has noted in the capital city to date were:
  1. An office block at Südkreuz railway interchange (Hildegard-Knef-Platz 2, Schöneberg sub-market) that Duxton Capital Advisors purchased from OVG/Edge Technologies
  2. A 49% share of the “Rocket Tower” (Kochstrasse 22, Kreuzberg sub-market) acquired by Ilmarinen from Amundi Asset Management; formerly the GSW highrise, the building is now the headquarters of Rocket Internet investment company founded by the Samwer brothers
  3. The “Neumann Forum” local shopping centre (Neumannstrasse 13, Periphery North sub-market) sold by RI Partners, formerly named Rickmers Immobilien, to the Berenberg Real Estate Berlin fund
 Investments outside the centre
Four non-central sub-markets accounted for two-digit shares of the total traded: Schöneberg (24.9 %), Periphery North (18.7 %), Charlottenburg (16.1 %) and Kreuzberg (11.2 %). The three biggest transactions played a major role in this distribution of sales. Whereas one of the biggest transactions was noted in each of the three markets Schöneberg, Kreuzberg and Periphery North, the figure in Charlottenburg was three. One of these was the “Spree Forum” office complex (Alt-Moabit 59-61) that a Hamburg family office sold to the Optima-Aegidius group of companies. In the two sub-markets that normally register the greatest churn of commercial properties - Ku’damm plus side roads and Mitte 1a - no trades took place in the 1st quarter of 2018. And in Mitte, the volume of transactions comprised a meagre 5.6 % (€48.2m) of the total. “Thanks to the shortage of properties available in the first quarter, investors had no option but to turn to secondary locations,” remarks Ulrich Denk, investment consultant and researcher at Grossmann & Berger. “However, this is not a sign of falling demand for real estate in central locations.”
Retail, industrial/logistics and building land all equally sought-after
As far as the various assets are concerned, four classes each accounted for two-figure shares of the total sold. Despite a transaction volume that was little more than half of its previous level, office properties remained the most popular type of asset, comprising 62 % (€530m); retail properties accounted for 13 % €111m), closely followed by industrial/logistics real estate (€96m) and building land (€98m) each with a share of 11 %. Grossmann & Berger noted the biggest increase - 130 % - for retail property assets due to the sale of the “Neumann Forum”. One of the biggest building land sales involved a plot in Mitte sub-market at Michaelkirchstrasse 22-23 that was bought by Development Partner.
Yields appear to have bottomed out
Compared with the same quarter a year ago prime yields on commercial properties bought and sold in Berlin in the 1st quarter of 2018 had dropped once more. The prime net yields on office properties were 3.0 %, on commercial buildings 2.90 %, and on logistics real estate 4.50 %. However, the yield on logistics properties was 40 basis points lower than it had been in the prior quarter. “Since yields are already very low, we don’t expect to see any further compression in the second quarter,” comments Denk.
Smaller properties on the market give national players the edge
Unlike the situation a year ago, the majority of buyers and sellers of Berlin properties in the 1st quarter of 2018 were national players. The market share of international buyers sank by 71 % to €194m; moreover, they accounted for an 80 % lower share of sales, with total transactions down to €176m. Denk surmises that, “these reductions are probably due to the relatively small size of the properties on sale in the first quarter. International investors tend to prefer large, expensive properties.”
Fund managers are buying, developers are selling
Fund managers were responsible for buying almost a third of the properties traded in Berlin (€245m). Private investors were involved in 12 % (€101m) of purchases, while developers (€98m) and professional pension schemes/pension funds (€96m) were each involved in 11 % of the total. A similar picture emerges in relation to the vendors of property. Developers accounted for 28 % (€239m), followed by fund managers with 16 % (€138m); private investors took a similar share of 15 % (€131m).
The detailed market survey will be available for download on our website shortly.

Press contact

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Britt Finke

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