Figures from Grossmann & Berger Berlin reveal that by the end of 2016 investment transactions in commercial property in Berlin reached a total of €5.0bn. The main contributors to this figure were numerous transactions each valued at over €100m. “The volume of transactions is the third-highest seen in the capital, topped only in 2007 and 2015. That is all the more remarkable considering that parties to transactions totalling around a billion euros postponed signing until 2017,” says Holger Michaelis
, managing director of Grossmann & Berger Berlin. In absolute terms, the volume of commercial real estate sold in Berlin was 36% lower than the result in 2015. First and foremost this is because no transactions comparable in size with the Potsdamer Platz portfolio trade were recorded - in 2015 this sale alone accounted for €1.3bn. Compared with the three previous quarters, business was briskest in the 4th quarter, when trades totalled €1.65bn.
11 sales for more than €100m each
Grossmann & Berger Berlin registered eleven transactions with price tags of at least €100m each. The biggest transaction was the sale of the “ParkInn by Radisson Berlin Alexanderplatz” hotel (Mitte) which FDM Management bought from Brookfield Properties and Starwood Capital as part of a portfolio trade containing a total of nine former state-owned Interhotels, one of which is “The Westin Grand Berlin” in Friedrichstrasse (Mitte 1a). The next biggest trade was the “Treptower” base building, sold by Alstria Office REIT AG to Blackstone for some €230m (An den Treptowers) located in the Periphery South sub-market, which extends as far as the inner city sub-markets of Kreuzberg and Friedrichshain. The two development projects at Humboldthafen harbour basin, “H3” and “H4” (Invalidenstrasse, Mitte 1a), also changed hands for a nine-digit sum. The investor, insurance company Zurich Versicherung, purchased the real estate from LIP and ABG, the joint venture developing the properties.
Investors concentrated on the central sub-markets Mitte 1a, Mitte, and Friedrichshain, which accounted for 22%, 16% and 15% of the transaction volume respectively. Whereas the sub-market Mitte 1a owed its high transaction volume of €1.1bn primarily to the previously-named sales of “The Westin Grand Berlin” and the “H3” and “H4” projects, the second and third biggest sub-markets generated their results of €778m and €743m from a mix of big-ticket and medium-sized transactions. In these markets, trades included the sale of the “ParkInn by Radisson Berlin Alexanderplatz” that was mentioned earlier; the “Pressehaus am Alexanderplatz” (Karl-Liebknecht-Strasse, Mitte) which DIL sold to Tishman Speyer and the “2Towers” sold to La Française Forum Real Estate Partners (Leipziger Strasse, Mitte).
Other major transactions in Berlin during the year 2016 included the “Victoriastadt Lofts” (Schreiberhauer Strasse, Periphery East) acquired by Schroders for some €130m, and the “City Carré” (Lange Strasse/ Koppenstrasse, Friedrichshain) which Art-Invest purchased from a closed fund under Commerzbank management.
Yields continue to slip back
As in the past, investors focussed on office properties in 2016. Accounting for 62% of the total volume of transactions, office properties were the most popular asset class. This segment saw turnover of some €3.12bn, or 33.5% below the volume recorded in the prior year (€4.69bn). For retail properties, the year 2016 closed with a transaction volume of €798.2m, close to 16% of the total. Thus this asset class was also appreciably less in demand; Grossmann & Berger Berlin calculated a drop of 58%. Hotel properties followed in third place, with a share of about 12% (€617.5m). Compared with the prior year the net prime yields* for office and retail properties fell by a massive 40 and 30 basis points respectively and ended the year 2016 at 3.3% and 3.1%.
International investors play most active role
Unlike the prior year, international players figured first and foremost as investors. While they accounted for 66% of the volume purchased, they were behind only 36% of the volume sold. International investors comprised, above all, asset managers, opportunity funds, open-end/specialist funds and insurance companies. “In the international context, foreign-based asset managers continue to see excellent development opportunities on the Berlin market, even if rental rates have now risen quite considerably,” says Ulrich Denk
, investment consultant and researcher at Grossmann & Berger Berlin.
Asset managers on a shopping spree
Accounting for 39% of the total, asset managers were the most active buyers
(€1.93bn), followed by opportunity/equity funds with 12% (€597,4m) and open-end funds with 9% (€441.8m). When it came to selling
properties, project developers accounted for the biggest share, i.e. 24% (€1.22bn), ahead of opportunity/equity funds with 16% (€778.1m) and closed funds with 11% (€567.3m).
“In 2016 Berlin once again demonstrated that it is an attractive target for international investors. The city has benefited in no small measure from its status as capital city and its above-average economic growth. In the early part of 2017 we’ll see figures explode as contracts initiated in 2016 are signed. Therefore Grossmann & Berger Berlin expect - assuming the overall business environment remains favourable - the transaction volume to reach the 5-billion-euro mark once again,” says Michaelis
* The prime yield is the initial return attainable on a property that has been let on normal market terms (tenants with good credit ratings), has top quality structure and fit-out, and stands in one of the very best locations. It is stated as net initial yield in per cent, i.e. the ratio between the annual rental income less non-apportionable ancillary costs and the gross purchase price (net purchase price plus land acquisition tax, entry in the land register, notary fees and agency commission).
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