In the 2nd quarter the business of investing in commercial properties in Berlin continued almost as briskly as in the unusually strong 1st quarter. The volume of investment transactions in the German capital had reached some €2.6bn by the end of the 1st half year. Year on year this translated into a 34% increase. “That is the second-highest half-year result in the last ten years, topped only in 2015,” remarks Holger Michaelis
, managing director of Grossmann & Berger, member of German Property Partners
Greatest transaction volumes outside the classic locations
The high volume of transactions in Berlin was essentially due to seven sales for over €100m each and six trades for properties costing more than €50m. 55% of the total volume of transactions resulted from the sales in the €100m plus range. So far the biggest confirmed trade in the 1st half year was sale of the “Zalando Headquarters” on Valeska-Gert-Strasse for which Capstone Asset Management paid UBM Development some €196m. This trade, together with “Berlins Grosse Freiheit”, the Germany headquarters of Coca Cola in the Friedrichshain Mediaspree urban development, which Rockspring Property Investment Managers purchased from Deka Immobilien in the 1st quarter, meant that the Friedrichshain
sub-market took a 12% share of total investments (some €300m).
At the end of the 1st half year, Periphery South
again emerged as the biggest sub-market for investment with around 20% (about €500m) of the total transaction volume. In the 1st quarter this sub-market saw ownership of the former “Vattenfall Building” at Puschkinallee 52 pass to the Federal real estate corporation Bundesanstalt für Immobilienaufgaben (BIMA), followed in the 2nd quarter by the sale of the “Neukölln Arcaden”, a shopping mall, at Karl-Marx-Strasse 66. Tristan Capital Partners sold this retail property to Deutsche Asset Management. The 2nd quarter sale of the “Eight Floors” at Franklinstrasse 28-29 made a major contribution to the 10% of total transactions posted in the Charlottenburg
sub-market (some €265m). Allianz acquired this office block from Patron Capital and Suprema Immobilienverwaltung at a price of some €180m.
Mitte and Mitte 1a are the classic investment hot spots
Quite a lot happened in the classic sub-markets too. For example, in the 2nd quarter Barings purchased the “Vattenfall Headquarter” at Chausseestrasse 23, Mitte
sub-market, from Westbrook Partners. In the 1st quarter the HIH Hamburgische Immobilien Handlung bought the “Quartier am Auswärtigen Amt”, a mixed-use development near the German Foreign Office at Oberwallstrasse 24, Mitte 1a
, from Arab Investments. At the end of the 1st half year these two sub-markets accounted for shares of some 8% (about €220m) and 7% (some €190m) of the total transaction volume respectively.
Offices, offices, retail, hotel
Because ten of the thirteen biggest transactions in Berlin involved office properties, this class of assets closed the 1st half year with a 72% share of the total volume. The total of €1.9bn was double the share noted a year before. Thanks to the sale of the shopping mall “Neukölln Arcaden”, retail assets accounted for 10% of the total (some €250m). Although hotels accounted for two of the thirteen biggest trades, this class of asset made up only 8% (some €200m) of the total, compared with 29% in the prior year. In the 1st quarter AXA Investment Managers acquired the “Abba Hotel Berlin” on Lietzenburger Strasse (Wilmersdorf sub-market) and in the 2nd quarter Motel One sold the “Motel One Berlin Hauptbahnhof” on Invalidenstrasse (Tiergarten sub-market) to LHI Immobilien Leasing.
Yields fall by 20 to 30 basis points
Although the volume of transactions continued its upwards trajectory, the prime net yields stayed on a downwards path. Yields on office properties fell by 20 basis points to 3.20% and on commercial buildings by 30 basis points to 3.00%. “If investor demand continues to outpace supply, the yields on office properties in top locations could fall to 3.0 per cent and for mixed commercial properties it could even drop below the 3.0 per cent mark,” says Ulrich Denk
, investment consultant and researcher at Grossmann & Berger.
Asset managers buying, developers selling
International and national players on the market were exactly balanced, featuring in equal measure as both buyers and sellers. The most active group of investors was comprised of asset managers with a share of some 25% (about €630m) of the transaction volume. Insurance companies (some €405m), pension funds (some €390m) and open-end/specialist funds (some €350m) accounted for shares of between 16% and 14%. Project developers used the favourable circumstances to sell properties. Accounting for 34% (some €860m) they were the biggest single group of vendors, ahead of the opportunity/equity funds with 20% (some €510m) and open-end/specialist funds with 17% (some €430m).
“At present some big-ticket properties are on the market. These include, for example, the “Sony Center” and the Mercedes-Benz/Anschutz new build in front of the events arena. Since negotiations are likely to be completed in the third quarter and in view of the just recently announced sale of the Springer new build and the Axel-Springer Mall for some 755 million euros, the third quarter seems to be heading towards a record result. Whether this trend will last until the end of the year depends on which other properties are offered for sale. At the moment we expect the annual transaction volume to be at least 6.0 billion euros,” forecasts Michaelis
The detailed market survey will soon be available and can be downloaded from our website