In the 1st half of 2017 the Hamburg market for investment in commercial properties was unable to match the record transaction volume seen in the 1st half of 2016. Figures from Grossmann & Berger, a member of German Property Partners
(GPP), showed that 55 commercial properties valued at a total of €1.35bn were traded. Year on year this translates into a drop of 33%. “In view of the shortage of properties, it is hard to approach last year’s very high trading figure. 1.35 billion euros is nevertheless a good result, especially since 880 millions were realized in the second quarter. That is almost twice the amount traded in the first quarter. Investors are consistently very interested in Hamburg,” remarks Axel Steinbrinker
, managing director of Grossmann & Berger.
One transaction over 100 million euros per quarter
The sale of the “Radisson Blu Hotel” (Marseiller Strasse 2, Alster West) for some €200m, the top transaction of the 1st quarter, was followed in the 2nd quarter by another big-ticket transaction. When Orion Capital Managers sold their “Symphonie” portfolio, Patrizia acquired properties including the “HafenCity Gate” (Am Sandtorkai 74-77, HafenCity) for its commercial property fund ‘Gewerbe-Immobilien Deutschland II’ for a price in the three-digit millions. The greatest volume of trades, some €400m, was generated by properties costing between €26 and €50m. In absolute figures, most properties - 24 transactions - traded for under €10m each.
Office properties are still favourites
Accounting for some €722m and thus 54% of the transaction volume, offices remained investors’ favourite properties. Office block sales, apart from “HafenCity Gate”, included the “Economic Center” (Heidenkampsweg 96+98, City South) sold by Publity to Blackrock Investment Management and “Elbhof” (Steinhöft 9, City) sold by Quest Investment Partners to a family office. The second most popular assets were hotels, whose share of €243m translated into 18% of the total volume. Only two transactions were involved: the “Radisson Blu Hotel” and the “Generator Hostel” (Steintorplatz 3) sold in the 1st quarter by Patron Capital and Invesco Real Estate to Queensgate.
Ongoing yield compression
Year on year the net prime yields* dropped further. On office properties yields fell from 3.7% to 3.3%, on commercial buildings from 3.6% to likewise 3.3%, and in the case of industrial and logistics real estate from 5.4% to 4.9%. “In the current market environment, core real estate in prime locations can sell for multiples of up to 30,” says Steinbrinker
HafenCity and City South in second place
Due to the big-ticket sale of the “Radisson Blu Hotel” the Alster West district accounted for 23% (€304m) of the total volume and thus more than any other sub-market. HafenCity and City South sub-markets shared second place, each with trades valued at €240m or 18% of the total. Nine commercial properties changed hands in City South. In addition to the “Economic Center” these included “City-Tor” (Heidenkampsweg 99-101) and Heidenkampsweg 44-46, two office blocks in a Blackstone portfolio sold to alstria office REIT. The building on Nagelsweg 37 was sold by Züblin Immobilien as part of a package purchased by CLS Holdings. All properties had price-tags in the double-digit millions. The City sub-market placed third, with a share of 9% or €116m. “However, the largest number of transactions - thirteen - took place in the Harburg/Hamburg South sub-market. Most of these trades were priced in the single-digit millions and involved value add and opportunistic real estate or development sites. It is obvious that investors and developers are focussing on non-central districts because the supply of properties in core locations is barely able to meet demand,” says Steinbrinker
National investors predominant
In the 1st half year international players were less active on the market for investments in commercial properties than national buyers, who accounted for 65% of the transaction volume (€877m). Most foreign investment came from Norway, Great Britain and the USA. As vendors, however, both national and international players were equally represented (both €675m).
Thanks to the purchase of the “Radisson Blu Hotel” by the Wenaasgruppen from Norway, private investors/family offices featured as the largest group of buyers, accounting for 21% of the transaction volume (€284m). Open-end/special funds were in second place with 20% (€275m) and asset/property portfolio managers came third with 13% (€171m). The selling side of the equation was dominated by opportunity/equity funds, accounting for 25% (€338m) of the transaction volume, followed by asset/property portfolio managers with 22% (€298m) and project developers/builders with 12% (€159m).
“Even if the first half year result failed to match that of the prior year, the market is noticeably livelier than it was. There are so many transactions backed up in the pipeline that we expect the year-end result to be a good one. However, there is a long way to go before we reach the prior year’s figure of €4.5bn,” 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