In 2017 the volume of investment trade in commercial properties in Hamburg was €3.9bn, falling short of the record figure of the prior year (€4.5bn). The figures compiled by Grossmann & Berger, a member of German Property Partners
(GPP), thus reveal a decline of 13%. The number of properties traded also fell; a decline from 174 to 125 translates into a fall of 28%. “Although fewer commercial properties were traded in Hamburg and the volume of transactions fell in 2017, this should not be seen as evidence for anaemic market activity. On the contrary: demand from domestic and foreign investors is exceptionally high. However, few investors are willing to part with their Hamburg properties due to the lack of alternative investment opportunities,” says Axel Steinbrinker
, managing director of Grossmann & Berger, explaining how the market has trended over the past year.
Portfolio sale boosts transaction volume in the 4th quarter
Not only was the 4th quarter of 2017 the best one of the year, it was also the best 4th quarter since 2006. This was primarily due to the portfolio transaction in which Signa Holding bought a total of five properties from RFR Holding. Two of the properties in the portfolio are in Hamburg’s City district and the selling prices were each in the treble-digit millions bracket. The transaction involved the two office and commercial buildings named “Arkadenhof” (Neuer Wall/Jungfernstieg) and “Kaufmannshaus” (Bleichenbrücke 10/Grosse Bleichen). Other transactions with price tags in the three-figure millions were already announced in earlier quarters:
Wenaasgruppen paid Azur Property Investments about €200m for the “Radisson Blu Dammtor” (hotel, Marseiller Strasse 2, Alster West)
Patrizia paid Orion Capital Managers around €175m for the “HafenCity Gate” office building (Am Sandtorkai 74-77, HafenCity)
The “Kaisergalerie” (office and commercial building, Grosse Bleichen 23-27, City) was sold for €170m by Quantum Immobilien and the alstria office REIT to the Swiss investor in foreign real estate Anlagestiftung für Immobilienanlagen im Ausland
Nevertheless, the transactions involving over €100m could not outweigh the shortage of properties selling for €50m or less.
Hotel assets double their transaction volume
In 2017 the most desirable class of asset was, as in the prior year, office properties, which accounted for 71 % of the total traded volume. With the exception of the “Radisson Blu Dammtor” hotel, all the properties sold for prices in the three-figure millions were offices. Hotel properties were the second-most popular asset, taking a 14 % share of the total. Year on year the traded volume doubled to €558m. The “NH Hamburg Mitte” hotel (Schäferkampsallee 49, Eimsbüttel) was among the assets sold as part of a portfolio trade in the 4th quarter to a French REIT named Foncière des Régions. The price paid was in the double-figure millions. Mixed use properties, which accounted for a share of 7 % (€281m) were the third most popular type of asset. One property in this latter category was the “Neues Steintor” ensemble (Beim Strohhause 2-8/Hammerbrookstrasse, St. Georg/City South), which Berenberg Real Estate acquired in the 2nd quarter at a cost of €77m for a special fund owned by fund managers Hamburger Pensionsverwaltung.
Prime yields sink to all-time lows
Prime yields on all classes of assets continued their downward slide. At the end of the 4th quarter the prime yield on office and commercial buildings fell below the three-per-cent threshold for the first time, to 2.9 %. The premium yield on logistics properties fell to 4.6 %. “Historically, Hamburg now has the lowest figure for prime yields ever seen, and the price to earnings multiples have risen to new all-time highs. In the office segment multiples of up to 31 have been paid, and logistics properties can already command a multiple of 21,” remarks Steinbrinker
Most sales in City South and Harburg
Ranking the sub-markets by sales volumes sees the first three places go to the major office districts of City, City South and HafenCity. First-placed City sub-market accounted for 38 % of the total transaction volume (€1.5m), followed by City South at 14 % (€562m) and HafenCity at 11 % (€445m). A number of transactions were registered for properties on Heidenkampsweg in the second-ranked sub-market City South.
In the 3rd quarter Morgan Stanley sold the “Double XX” (Heidenkampsweg 58) to DIC Asset and the “Victoria Office” (Heidenkampsweg 73-79) to La Francaise. Both transactions were priced in the two-figure millions.
Moreover, in the 2nd quarter Publity sold the “Economic Quarter” (Heidenkampsweg 96-98) to BlackRock’s Europe Property Fund IV for a price that was likewise in the two-figure millions.
In the 2nd quarter alstria office REIT took two other office properties on Heidenkampsweg as part of a twelve-piece real estate portfolio; the “City Tor” (Heidenkampsweg 99-101) and the building at Heidenkampsweg 44-46.
“Although these three sub-markets traditionally report the highest traded volumes, the greatest numbers of actual sales at the end of 2017 were in the peripheral sub-markets of Harburg and City South. These districts posted 19 sales each, whereas City sub-market reported 18. The shortage of properties in central locations is making other districts such as those in the south of Hamburg increasingly attractive. However, no property in Harburg sold for more than 25 million euros,” says Steinbrinker
, commenting on the results.
Domestic investors predominant
The share of domestic investors fell slightly from 65 % of the total transaction volume in 2016 to 60 % in 2017 (€1.6bn). Correspondingly, foreign buyers accounted for 40 %. They came from countries such as Austria, the USA, Norway, Switzerland, France and Great Britain. Domestic players dominated the selling side of the equation too, accounting for 61 % of the traded volume. The foreign vendors, with a share of 39 %, came from the USA, Luxembourg and Great Britain.
In 2017 open-end/specialist funds were the most active buyers of Hamburg properties and responsible for a third of the total traded volume (some €1.3bn). The most prominent vendors were project developers/builders, whose share was 30 % (some €1.2bn).
“In view of the unwillingness of owners to sell their commercial properties in Hamburg, 2018 is unlikely to set any new records. But having said that, there are in fact several large trades in the pipeline such as the “Hanse-Viertel”, the “Wandelhalle” concourse in the main station or the new Olympus headquarters. We therefore expect to see transactions reach, at the very least, the ten-year average of 2.8 billion euros,” says Steinbrinker
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