The market for investments in commercial real estate in Hamburg remains marked by a shortage of properties. The very high transaction volume seen in the prior year had not been equalled by the end of the 3rd quarter of 2017. Figures from Grossmann & Berger, a member of German Property Partners
(GPP), showed that 80 commercial properties valued at a total of €2.30bn were traded. Compared with the prior year 33 fewer properties were sold. The volume of transactions fell by 28%. “The decline in the transaction volume is in no way a sign that the market is slowing. Demand for commercial real estate in Hamburg has been higher than ever this year. Sometimes we see more than a dozen potential buyers bidding for one property,” comments Axel Steinbrinker
, managing director of Grossmann & Berger.
Shortage of “little ticket” sales
In the first three quarters of 2017 three transactions with a volume of over €100m each were registered. The highest volume was generated by the 1st-quarter sale of the Radisson Blu Dammtor (Marseiller Strasse 2, Alster West); Wenaasgruppen paid Azur Property Investments about €200m for this hotel. In the 2nd quarter Patrizia took over the “HafenCity Gate” office building (Am Sandtorkai 74-77, HafenCity) as part of the “Symphonie” portfolio purchased from Orion Capital Managers for around €175m. The third-biggest transaction took place in the 3rd quarter. The office and commercial building “Kaisergalerie” (Grosse Bleichen 23-27, City) was sold by Quantum Immobilien and the alstria office REIT to the Swiss investor in foreign real estate Anlagestiftung für Immobilienanlagen im Ausland for €170m. Commenting the situation Steinbrinker
says, “These big-ticket trades totalling some 540 million euros were not enough to make up for the low number of sales of less expensive properties. In Hamburg there are usually a large number of trades in properties costing less than 50 million euros, but that has not been the case this year.”
Hotels make up a fifth of transaction volume
At the end of the 3rd quarter office properties remained investors’ preferred class of asset, accounting for 58% of the transaction volume (€1.32bn). Hotel investments accounted for a 21% share (€474m). Four hotel trades were noted in the 3rd quarter. These include the sale of two hotels still under construction, the “Super 8” and the “Holiday Inn” (Eiffestrasse 16, Hamburg East). Union Investment paid UBM €90m to acquire both projects. Mixed use properties with a share of 12% (€278m) were the third most popular type of asset. In fourth place were retail properties and building land, each with a 4% share of the market (€85m each). “As an asset, retail or trade properties are less popular with investors than logistics or residential real estate. The ever greater changes in the retailing business and the stronger focus on online trade have made some investors wary of buying retail buildings,” explains Steinbrinker
The 3% yield has arrived
“The shortage of real estate for sale in Hamburg and the immense demand are reflected not only in the reduced volume of transactions, but also in the further contraction of yields. We are now chipping away at the three per cent mark”, says Steinbrinker
. The prime yield on office properties fell from 3.5% to 3.1%, on commercial buildings from 3.4% to 3.0% and for logistics properties from 5.4% to 4.6%.
City South tops the rankings
Accounting for a fifth of the volume of transactions (€458m), the City South sub-market edged ahead of second-placed City, with a share of 19% (€437m). By the end of the 3rd quarter 14 properties had been traded in City South. These included the mixed use property “Neues Steintor” (Beim Strohhause/Hammerbrookstrasse, City South) that the Hamburg pension fund Hamburger Pensionsverwaltung sold to Berenberg Real Estate for some €77m in the 2nd quarter. Thanks to their two big-ticket transactions, the Alster West and HafenCity sub-markets placed third and fourth with shares of 13% and 12% respectively (€297m and €278m). “From the locations of traded properties it is obvious that there is little available in the central city. In the City sub-market a mere eleven properties changed hands, last year 27 had been traded by this time. Most transactions are classic cases of sales by project developers or portfolio adjustments,” says Steinbrinker
Non-nationals only make up just over a third
International buyers, primarily from Norway, Great Britain, Switzerland and the USA, accounted for a share of 37% (€860m) at the end of the 3rd quarter. Foreign owners were the sellers in 39% of transactions (€899m). Most of these vendors came from the USA, Luxembourg and Great Britain.
Open end/specialist funds made up 24% of the buying market (€557m), followed by pension funds/pension plans with a share of 19% (€435m). The dominant sellers were project developers/builders with a 24% share of the market (€561m) and opportunity/equity funds which accounted for 20% (€453m).
“The tight situation on the market for commercial properties is unlikely to ease. Owners are unwilling to generate fresh capital that will need to be invested on the market and this creates a noticeable lack of properties for sale. International investors also regard Hamburg and Germany overall as “safe havens”, a view that generates enormous demand for properties. This in turn pushes up purchase prices and price to annual rent ratios. Despite that, this year is not expected to set a new record, although a total of of €3.5bn seems possible,” forecasts Steinbrinker
The full market survey will soon be available and can be downloaded from our website