Investment Berlin 1Q2016

Hesitant start

Press release | Berlin

Whereas 2015 produced the record result of €7.8bn, the market for commercial property investment in Berlin ended the 1st quarter of the year 2016 with a transaction volume of only €680m. Compared with the 1st quarter of 2015 the volume of turnover fell by some 38%. “This comparatively slow start to the year is primarily because there were no portfolio transactions and very few sales for more than 100m euros were registered. Moreover, many sales were brought forward and completed at the end of last year. We expect the market to develop well during the rest of the year and to see the volume of transactions total around 4.5bn euros, which would be comfortably higher than the long-term average of 3.8bn euros but well below the result returned last year,” forecasts Holger Michaelis, manager director of Grossmann & Berger Berlin.
Greatest sales volume in East Periphery sub-market
In the 1st quarter of 2016 'East Periphery' registered a larger share of investment transactions than any other sub-market, accounting for some 25% of the total. This top ranking was attributable to one transaction of over €100m. Apart from this outlier, attention was concentrated on the inner city locations for which demand is traditionally high, so that together the Mitte 1a, Mitte and ‘Ku’damm plus side streets’ sub-markets accounted for about 50% of the total traded. ‘Ku’damm plus side streets’ took around 13% of the market (some €90m). The Mitte 1a sub-market accounted for nearly 17% (some €115m) and Mitte for close to 20% (around €135m).
Premium yields stable or trending lower
In the absence of big-ticket investments in retail properties, the office sector was the preferred asset class in the new year with a share of 83.6% of the total transaction volume, which translated into nearly €570m. Year on year, therefore, this asset class has swapped places with retail properties, which accounted for only 7.6% of the total, or some €52m. Hotels were the third most-traded asset, accounting for a share of 2.3% and a transaction volume of about €16m.
In the 1st quarter of 2016 the premium yield on office properties settled at 3.9%, but in view of what they now see happening on the market, Grossmann & Berger Berlin expect this figure to slip further in the 2nd quarter. The premium yield on retail properties was also stable at 3.7%.
Foreign buyers predominate
In the 1st quarter of 2016 – as in the same period of the prior year – foreign players were a very strong presence on the investment market for commercial properties in Berlin, particularly as buyers. Whereas
international investors were involved in some 75% of the volume traded, they actually sold only 33% of the total. The international investors were made up of pension funds, asset managers and property AGs/REITs. “There is more international demand for investments in the capital of Berlin than ever before,” says Ulrich Denk, investment consultant and researcher at Grossmann & Berger Berlin.
Pension funds biggest single group of buyers
Accounting for a good 25% of the transaction volume (€171.4m), pension funds were the most prominent buyers on the market. Asset managers and private investors followed in second and third places; their share of total transactions amounted to 19% (€129.9m) and 14% (€96.6m) respectively.
Asset managers are biggest vendors
When it came to selling property, asset managers formed the biggest single group of vendors with 31% of the volume traded (€210.8m). They were followed by Corporates with a 14% share, open-end/specialist funds (12.9%) and closed funds (8.1%).
Demand remains high in 2016
“The ongoing glut of cash and positive economic indicators will continue to fuel investment in commercial real estate in Berlin, whereby the shortage of properties will be an increasingly limiting factor,” says Michaelis, summing up the situation.
The detailed market survey will be ready for download on our website shortly.

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