Investment Berlin 3Q2015

Investments in commercial properties rise by 70%

Press release | Berlin

Figures for the Berlin market compiled by Grossmann & Berger Berlin revealed that by the end of the 3rd quarter of 2015 commercial properties valued at €4.4 bn had changed hands. Due to a large number of big-ticket sales and portfolio trades, investment activity was some 70% higher than in the prior year. “After just nine months, the volume of transactions has topped the total for the whole of 2014,” says Holger Michaelis, managing director of Grossmann & Berger Berlin.
A great many big-ticket trades
Once again, in the first three quarters most activity was concentrated on the Berlin sub-markets “Mitte” and “Mitte 1a”, which each accounted for a good 21% of the volume traded. During the first nine months the two largest transactions in these sectors involved the “Stettiner Carrée” office complex at Caroline-Michaelis-Strasse 5-11 which Allianz Real Estate Germany GmbH bought from Global Asset Capital at a price of around €210m, and “The Q – Quartier 205” at Friedrichstrasse for which Tishman Speyer paid Pontegadea/Banco Santander €335m. The sub-markets in the outskirts of Berlin also benefited from increased demand, as may be seen from the largest transaction registered to date, the first-quarter sale of the “Boulevard Berlin” shopping centre on Steglitzer Schloss-Strasse that the French operator Klépierre bought from a Dutch competitor, Corio, for around €370m. Another top transaction in the first nine months was the 2nd-quarter sale of the “Victoriastadt Lofts” on Schreiberhauer Strasse, Berlin-Lichtenberg, for which I-REIT Global paid Wealth Cap some €144m.
The three biggest retail properties add up to €700m
As seen in previous years, during the first nine months of 2015 investors focussed some 55% of their attention (€2.4 bn) on office buildings, although this asset accounted for slightly less of the total than before. Retail properties made up some 26% (€1.16 bn) of the market – largely due to the three biggest transactions in this sector, which contributed some €700m to the total. This shift towards retail was essentially the result of one specific transaction, namely Klépierre’s take-over of the shopping centre operator Corio in the 1st quarter, plus the previously mentioned sales of the “Stettiner Carrée”, the “Victoriastadt Lofts” and “The Q – Quartier 205”. In view of the enormous excess of demand over supply coupled with massive amounts of surplus cash, the premium returns for office properties sank by 0.55 percentage points to 4.2%, while the premium return for retail assets fell by 0.8 percentage points to 3.7%. “There is no end to this process in sight,” says Ulrich Denk, investment consultant at Grossmann & Berger Berlin. The ratio of portfolio to single-property sales was 32% to 68% of the total volume of transactions. Counted by the actual number of transactions in the first nine months, single sales predominated with 81%.
International and national players almost equally active
Accounting for about 25% of the transaction volume (€1.1 bn) open-end and specialist funds were the leading buyers of Berlin real estate, a share primarily attributable to the large number of big-ticket trades in office and hotel assets. Trailing some way behind, REITs, private investors and asset managers took roughly equal shares of about 13.5% each (around €600m). Private investors formed the biggest group of vendors, responsible for 19% of the volume (€827m), followed by developers (18% or €792m) and open-end/specialist funds (13% or €590m). In the first three quarters of 2015 there was a slight preponderance of non-German over German investors on the commercial real estate market in Berlin. International investors were the purchasers of some 52% of the volume traded, but they sold slightly more, namely around 58% of the total. The biggest international investors were REITs, asset managers and open-end/specialist funds. When it came to international vendors, private investors, REITs, project developers and open-end/specialist funds were the most strongly represented groups.
Outlook 2015
Because interest rates remain low and, consequently, there are no real alternative forms of investment, Grossmann & Berger Berlin expects to see no changes in the situation on Berlin’s investment market between now and the early part of 2016. “We expect to see the market develop well up until the end of 2015 and the year to finish with a new record transaction volume of over €7 bn. Set in 2007, the existing record is €6.4 bn, but it will definitely be broken this year. The ongoing lack of investment products acts as a brake on market growth.”
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