As Grossmann & Berger had already predicted at the end of the 3rd quarter, 2018 closed with a new record result on the Hamburg market for investment in commercial properties. Some 170 transactions generated a sales volume of €5.95bn. This represents growth of 65% compared with 2017. In the 4th quarter alone, commercial properties changed hands for a total of €1.95bn. “2018 is a unique year in the history of investment in Hamburg real estate. The run on commercial properties produced a record result and is a clear indication that Hamburg is a prime location for investors,” says Axel Steinbrinker,
managing director of Grossmann & Berger, a member of German Property Partners (GPP).
Big-ticket trades in office properties
A large number of transactions for over €100m each are behind the exceptional annual result in Hamburg. 16 sales, totalling €2.7bn, fell into this category. Almost every single one concerned an office property. Accounting for 73% of the total, the market was dominated by transactions to sell single properties. The first quarter sale of the “Springer Quartier” (Kaiser-Wilhelm-Strasse, City) remained the biggest transaction; a joint venture comprising the MOMENI Group and Black Horse Investments sold the property to a company that manages professionals’ pension schemes. One big transaction in the 4th quarter was the sale of the “Intelligent Quarter” ensemble consisting of the “Shipyard” and “Watermark” office buildings (Überseeallee 10+12, HafenCity) for which ECE and Strabag received over €150m from Real I.S. Another big-ticket sale in the year’s closing quarter was that of the “Quartier am Zeughaus” (Christoph-Probst-Weg 26-31, 3-4, 1-2, Eppendorf) for which Godewind Immobilien paid Blackstone/Officefirst some €150m. Likewise in the 4th quarter Wartburg HIH finalized the sale of its office property portfolio to the French asset manager Amundi. “Valentinshof” (Caffamacherreihe 8-10, City) and Brooktorkai 20 (HafenCity) were among the Hamburg properties in the portfolio, each costing over €100m.
Office and mixed use properties remain the strongest asset classes
As in the past, office buildings were the most traded asset class, accounting for 55 % of the trading volume and a total of €3.3bn. The most recent of the 4th-quarter trades in this category was the sale of what used to be “Hotel Prem”, which was converted into the “Prem Contor” office buildings in 2008 (An der Alster 9, Alster East). A private investor sold the building for some €17.6m to the LHI Group for an open end property investment fund (retail). Following in second place, mixed use properties comprised 13% of the market (€797m). “Hanseviertel” (Grosse Bleichen 36, City) and “LaHoMa” (Langenhorn Markt 1-18) were the two major transactions in the latter category. Two portfolio trades involving industrial/logistics properties generated €274m, or four times the total traded in the prior year. One portfolio was the “Optimus Prime”, part of the “Beos Corporate Real Estate Funds Germany I”, that was purchased by Helaba Invest for institutional investors in Germany. Eight of the 21 properties in this portfolio are in Hamburg.
Investors focussing on central locations and forward deals
In 2018 the total traded in the central sub-markets City and HafenCity amounted to some €2.3m, or a share of 39%. Some €738m was generated by the sale of 17 properties brokered in City South. The biggest transaction in this sub-market was the sale of the “Olympus Campus” (Wendenstrasse 14-18) for around €250m. Forward deals amounting to €1.1bn comprised 19% of the total volume of transactions. Year on year this figure has doubled. “This development illustrates that the state of the office market in Hamburg is such that well in advance of their completion many new build premises are already let and sold to the final investors,” remarks Axel Steinbrinker.
Prime yields continue downwards slide
Over the course of the year, the run on commercial properties in Hamburg has further squeezed prime yields. By the end of the year yields on commercial buildings had slipped by 20 basis points to 2.70%. Premium yields on office properties dropped 0.1 percentage points to 2.80 %. By the end of 2018 the prime yields on logistics properties were 4.50% and thus likewise below their prior year’s level.
Investors/vendors: Developers remain dominant players on the market
In 2018 national buyers
featured most prominently on the market for investment in commercial properties in Hamburg. A mere 26 % (€1.6m) of the investment trades originated abroad, mainly in the USA and Great Britain. Listed property investment AGs/REITS were the most active group of buyers in 2018, accounting for 15% of the total volume (€881m), followed by pension funds and professionals’ pension schemes/funds with a 14% share, and specialist funds with 13%.
Two types of investor were most in evidence as vendors
. Private equity funds/opportunity funds were behind 27% of the total traded (€1.62bn). Developers formed the second largest group of vendors in 2018, with a share close to 27% (€1.58bn). They are benefiting from the current high levels of demand for rental offices in new builds and the resultant early pre-letting agreements, which in turn lead to buildings being sold prior to completion.
In view of low interest rates and the stability of the German economy, demand for suitable investment properties in Hamburg is set to continue. “However, we do not expect the year 2019 to repeat the exceptional performance of 2018 and reckon with a total transaction volume of between €4.0bn and €4.5bn. Prime yields bottomed out at the end of 2018. It is to be expected that yields will now consolidate,” says Axel Steinbrinker
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