In the 1st quarter of 2017 investment transactions totalled a mere €470m and thus dropped almost 50% below the figure seen on the market for commercial properties a year before. According to information collected by Grossmann & Berger, a member of German Property Partners
(GPP), only 14 commercial properties were sold compared with a 1st-quarter figure of 36 in 2016. “This collapse can be explained by a lack of real estate, above all in the core segment, and by the excellent result last year. Over the past three years many commercial properties in Hamburg have changed hands at least once. A good example of this is the “Radisson Blu Hotel” near Dammtor station that has been sold for the second time within three years”, comments Axel Steinbrinker
, managing director of Grossmann & Berger. “But there is still huge demand for investment properties.”
One sale for more than 100 million euros
The “Radisson Blu Hotel Dammtor” (Marseiller Strasse 2, Alster West) sold for a price of around €200m and was thus the biggest transaction on the investment market for commercial properties in Hamburg. Azure Property from Luxembourg sold the hotel to the Norwegian firm Wenaasgruppen. It was the only transaction in excess of €100m. The second-biggest sale was that of the westerly “Grindel” highrise (Oberstrasse 14a-c, Alster West) for which the pension fund Bayerische Versorgungskammer paid Jargonnant Partners some €64m. Three properties were sold in each of the price categories €26m to €50m and €11m to €25m.
Hotel sales double the amount of office sales
In addition to the “Radisson Blu Hotel Dammtor”, the “Generator Hostel” (Steintorplatz 3, St. Georg) formed part of the chain sold in its entirety by Patron Capital (UK) and Invesco Real Estate (USA) to the British private equity company Queensgate Investment. Hotel assets thus accounted for half of the total volume of transactions. Offices made up a quarter of the total (€115m), followed by mixed-use properties comprising 18% (€86m). “In 2016 we were starting to see more mixed-use properties on the market. The combination of residential and commercial usage is becoming more attractive for investors and is now a feature of many new development projects,” says Steinbrinker
Yields drift steadily downwards
In view of the mismatch between supply and demand the prime net yields* on all asset classes slipped further behind those recorded in the previous year. The prime yield on office properties fell from 3.7% to 3.3%, on commercial buildings from 3.6% to 3.3% and in the case of industrial and logistics real estate from 5.4% to 4.9%.
Growing trend towards B locations
Alster West sub-market, the district which saw the two highest-priced transactions, accounted for 57% of the total investment volume (€268m) and was thus the top-ranking sub-market. The City sub-market placed second, accounting for 23%; the four transactions in this district totalled €110m. “In the first quarter as many commercial properties were traded in the Harburg sub-market as in the City. In 2016 Harburg was already the third most popular sub-market due to Blackstone’s takeover of Officefirst,” comments Steinbrinker
. “That shows that Hamburg too is experiencing a growing tendency to select B locations because there is too little choice in the core locations. Non-central districts will thus play a bigger role in investors’ future plans. Developers are especially eager to find properties and sites with good development potential, and the B locations are the likeliest places to look.” Sales in the Harburg sub-market included two new development projects on Neuländer Strasse: one transaction involved the CG Gruppe which took over the “Neuländer Quarree” (Neuländer Strasse/Hannoversche Strasse) from an insolvent firm, P & S Grundstücks- und Vermögensverwaltung; another involved the HafenQuartier Harburg Grundstücksgesellschaft, a property company that bought the site formerly used by the New-York Hamburger Gummi-Waaren Compagnie (Neuländer Strasse 4-10) from a private investor; plans include a spa and wellness centre.
Europeans on a shopping spree
About half of the transaction volume (€241m) in the 1st quarter of 2017 was attributable to investors from other European countries. These investors all came from Norway, Great Britain and the Netherlands. Foreign owners accounted for 64% of the properties sold (€302m). The purchase of the “Radisson Blu Hotel” by Wenaasgruppen meant that private investors/family offices dominated the buying side of the market with a share of 55% (€259m). The next-biggest shares of the market were taken by pension pools/funds, accounting for 14% (€66m) and opportunity/equity funds accounting for 12% (€57m). Asset/property portfolio managers were the biggest single group of sellers, with a share of 43% (€202m).
“Ground lost by the fairly weak start to the year can still be made up. In view of enormous demand and price/earnings multiples that can be as high as 30, properties that do come onto the market are soon snapped up. Considering the lack of properties and on the assumption that no large portfolio transactions take place, the transaction volume will not break the prior year’s record of 4.5 billion euros,” forecasts Steinbrinker
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*The prime attainable yield is the initial return that may be made 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).
Source graphic: Grossmann & Berger GmbH