The market for investment in commercial properties in Berlin returned a strong 4th quarter in 2018, closing with a transaction volume of some €2.7bn. Figures compiled by Grossmann & Berger, a member of German Property Partners (GPP)
, show a total trading volume for the year 2018 of €6.75bn. Although this is 8% less than in the prior year, it is still the third highest year-end result since records began. “The transaction volume was appreciably higher than we forecast a year ago. This shows that, despite the anticipated shortage of properties, there was brisk trading on the market throughout the year 2018. A larger number of agreements for properties outside the top locations helped boost the result,” comments Holger Michaelis
, managing director of Grossmann & Berger.
Big-ticket trades involving retail properties
Expensive single trades were the most salient characteristic of Berlin’s investment market in 2018. Grossmann & Berger noted a total of 110 commercial properties and building sites sold. In one of the three biggest agreements announced in Berlin, Aroundtown paid Park Hotels & Resorts some €297m for the “Hilton Berlin” (Gendarmenmarkt, Mitte) in the 2nd quarter. The second was Capstone’s 3rd-quarter sale of the Zalando Campus (Valeska-Gert-Strasse 2, Friedrichshain), to Hines for a Luxembourg fund for €235m. Likewise concluded in the 3rd quarter, the third-biggest transaction concerned a shopping centre, “Das Schloss” (Schloss Strasse 34, Periphery South) which Deka-ImmobilienEuropa bought from HFS Immobilienfonds 10 for €223m. A large number of these big-ticket sales were of retail properties, the second-strongest class of asset in Berlin, with 18% of the market.
Office properties account for most trades
As in previous years office properties were the dominant asset class on the market, accounting for a share of 58% (€3.9bn). One of the major transactions in this category was the sale of the “Techno Campus”, which passed from Caleus Capital to AXA REIM/Harel Insurance Company in the 4th quarter. In another 4th-quarter trade, “Telecity” (Lützowstrasse 105-106, Tiergarten) was sold to Ardian Real Estate by a fund under J.P. Morgan’s management. Duxton Capital Advisors purchased a big office development at Südkreuz (Hildegard-Knef-Platz 2) from OVG/Edge in the 1st quarter of the year.
As mentioned previously, retail properties comprised 18% of the volume traded (€1.2bn) and formed the second most popular asset class. Hotels followed in third place with a market share of some 8% (€520m). The proportion of portfolio sales dropped appreciably from 32% to 18%. However, forward deals comprised 20% of the market in 2018, up from 17% in the prior year.
Prime yields consistently low
In the 4th quarter yields, already low, continued to drift sideways. On office properties the prime net yield was 3.00%. Commercial buildings produced a yield of 2.9%.
Periphery becoming increasingly important
Unlike previous years, trading in 2018 focussed less on the central sub-markets and was spread more widely over the districts. Accordingly, several big-ticket transactions in peripheral locations were noted. Friedrichshain
and Mitte 1a
sub-markets took the largest share of the total volume traded, accounting for 11.6% each (some €783m). Equal shares were posted for Mitte
and Periphery North,
each returning 9.6% of the total (some €648m). Periphery South
registered a respectable 9.5% of trades. “The increased proportion of properties traded in peripheral districts shows that investors are turning their interest to these addresses in view of the shortage of real estate in established top locations,” says Ulrich Denk,
investment consultant and researcher at Grossmann & Berger, commenting on this development.
International investors remain comparatively prominent
Continuing the trend seen in the first three quarters, the year 2018 closed with a year on year reduction in the proportion of buyers and sellers from overseas. However, 60% of the investors came from outside Germany, so that Berlin still has a higher share of international buyers than any other top 7 city in Germany. At the close of the year international sellers accounted for 42% of the market.
Over a quarter of purchases made by fund managers
Mirroring the situation at the end of the 3rd quarter of 2018, fund managers were the biggest buyers
, responsible for a quarter of the volume traded. Listed property investment AGs/REITs accounted for a respectable 13% of the total. When it came to vendors/sellers
, fund managers (19%) , developers (17%) and listed property investments AGs/REITs were ahead of the field.
The full market survey
will soon be available to download from our website.