The 2nd quarter was a good period for investments in Berlin’s commercial properties. With sales at around €1.6bn the result was the second highest 2nd-quarter total ever seen in Berlin, and double the €860m noted in the 1st quarter. Overall, commercial properties valued at some €2.5bn were sold in the 1st half year. Despite a drop of 4%, this nevertheless represents the third-highest volume of transactions recorded during a half year in the national capital. “Many properties are coming on the market just now. Agreements should be ready for signing in the third and fourth quarters, so that the volume of transactions will be appreciably higher than in the first half of the year,” says Holger Michaelis
, managing director of Grossmann & Berger, a member of German Property Partners
(GPP). “In addition, we are noting a growing number of properties in other locations with asking prices which, in terms of price to annual rental income, would only have been seen in the CBD three years ago.”
Six new big-ticket trades in the 2nd quarter
The market’s dynamism showed particularly in properties traded for over €100m each. Their number jumped from two in the 1st quarter to eight by the end of the 2nd quarter. One big-ticket trade more than in the prior year was noted. Accordingly, the price segment in excess of €100m comprised the biggest share of the transaction volume, amounting to 58% or €1.4bn. In what is thus far the biggest sale to be announced in Berlin, Aroundtown paid Park Hotels & Resorts some €300m for the “Hilton Berlin” (Mohrenstrasse 30, Mitte 1a) in the 2nd quarter of this year. Properties costing between €26m and €50m proved popular with investors, accounting for 17% of the total, and the price category €51m to €100m claimed 14% of the market.
Attention split between the periphery and central sub-markets
The trades were spread relatively evenly across Berlin’s sub-markets so that no single sub-market accounted for more than a fifth of total trading. The most notable three regions at the end of the 2nd quarter were: Periphery North
, with a share of 19.0%, and two sub-markets that are usually in great demand and have bounced back from a weaker first quarter, Potsdamer/Leipziger Platz
with 12.9% and Mitte 1a
with 12.8%. The good result in Periphery North was essentially because nine transactions were concluded here, more than in any other sub-market. They included:
Mixed-use properties growing more popular
Office block at Gustav-Meyer-Allee 1, buyer: Commodus Real Estate, 2nd quarter
Retail property “Neumann Forum”, Neumannstrasse 13, buyer: Berenberg Real Estate Berlin, vendor: RI Partners, 1st quarter
Retail property “Hornbach”, Malchower Chaussee 6-10, vendor: CS Euroreal, 2nd quarter
Year on year there has been a clear shift in the way the total trading volume is divided among classes of asset. Although still the most sought-after asset class, office
properties made up only 50% of the total volume, down from 72%. Mixed-use
properties were the second-most traded assets in the 1st half of 2018, accounting for 17% of the market. Much of this result is attributable to the 2nd-quarter sale of the “Forum Landsberger Allee” (Landsberger Allee 177, Periphery East) for which Patrizia Grundinvest paid Peakside Capital around €100m. Investors were similarly keen to buy hotels,
whose share of total trading shot up to 15% from 8% a year ago. Several hotels were traded in the 2nd quarter, including the previously mentioned “Hilton Berlin” which changed hands for some €300m.
Prime yields in CBD stable, continuing to fall in non-central locations
By the end of the 1st half of 2018 the prime yields on Berlin properties had started to diverge. Whereas prime yields on office properties and commercial buildings fell appreciably less than before, dropping by 0.20 and 0.10 percentage points respectively, the yield on logistics properties plummeted. Prime yields on the latter fell 0.70 percentage points to 4.4%. On office properties the prime yield was 3.0%, and on commercial buildings 2.9%. “In the CBD and adjoining neighbourhoods yields are moving sideways, whereas in non-central and peripheral locations they are still falling,” explains Ulrich Denk
, investment consultant and researcher at Grossmann & Berger.
International players prefer to buy
International investors played a bigger role on the market for commercial real estate in Berlin compared with the year before. As investors
they spent €1.6bn, a quarter more than last year, and increased their share of the total market by about a third to 65%. International players also featured in more sales, but this rise was considerably less than their increased interest in buying. “At present, international investors are more likely to retain than sell their commercial real estate in Berlin,” remarks Michaelis.
international traders increased their take by 3% to €1.3bn, and their share of the total volume traded rose to 54%.
Fund managers and listed property investment AGs/REITs particularly active
Accounting for 29% of the Berlin market in the 1st half of 2018, fund managers were the biggest group of investors
. Listed property investment AGs/REITs and developers were also responsible for significant shares of the total volume, posting 14% and 13% respectively. Developers were prominent among the vendors
, accounting for a quarter of the total traded. With 17%, stock-exchange-listed property investment AGs/REITs took a double-digit share of the market, as did fund managers with 13% and insurance companies with 11%.
The full market survey
will soon be available to download from our website.