The investment market for commercial properties in Berlin closed the year 2015 with a new record. Essentially, this was due to one large portfolio sale and numerous transactions valued at over 100m € each. Figures from Grossmann & Berger Berlin show a total transaction volume for the year of €7.8bn. In the 4th quarter alone, the trade in commercial properties totalled €3.4bn. “The volume of transactions nearly doubled within the space of one year, producing a total some €1.3bn higher than the previous record set in 2007”, says Holger Michaelis, managing director of Grossmann & Berger Berlin.
15 transactions for more than €100m each
The largest known transaction was Savills Fund Management’s sale of the ensemble of buildings at Potsdamer Platz for some €1.3bn to Brookfield, an asset manager, acting in a joint venture with an Asian pension fund. Overall, not counting this portfolio trade, the city registered 15 transactions each costing upwards of €100m. Of all single transactions announced, the largest was the sale of “The Q” (“Quartier 205”), a shop and office building for which Tishman Speyer paid Inditex/Banco Santander some €335m. In the course of shopping centre operator Corio being taken over by the French shopping mall specialist Klépierre, the “Boulevard Berlin” mall also changed hands for more than €350m. Investors concentrated on the central sub-markets Potsdamer Platz, Mitte and Mitte 1a plus the South Periphery, which accounted for 19%, 15%, 14% and 13% of the volume of transactions respectively. Whereas the high volume of transactions in the Potsdamer Platz segment - some €1.5bn - was largely attributable to the previously mentioned sale of the Potsdamer Platz ensemble of buildings, the totals of €1.17bn and €1.08bn posted in the second and third biggest sub-markets stemmed from a large number of big-ticket transactions. These included the “Stettiner Carrée” located in Mitte, which Global Asset Capital sold to the Allianz insurance company, and the previously mentioned sale of “The Q” in the Mitte 1a sub-market.
Other major transactions in the year 2015 included the lower floors of the “Treptowers” acquired for over €200m by the Alstria Office REIT AG as a consequence of its takeover of the Deutsche Office REIT AG, and, following the takeover by Hudson Bay, a Canadian REIT, of Kaufhof (formerly Metro Group) the “Kaufhof” on Alexanderplatz passed into new ownership. “A number of one-off events such as company takeovers and portfolio trades underlie the record result in Berlin and are unlikely to be repeated in coming years,” concludes Michaelis.
Office and retail properties suffer considerable yield compression
In 2015 investors continued to focus on office buildings. Accounting for 60% of the total volume of transactions, office properties remained the most popular asset class. This segment saw turnover of some 4.69bn €, some 105% above the volume recorded in the prior year (€2.28bn). Retail property transactions totalled €1.89bn in 2015, thus accounting for around 24% of the total. A massive increase of 152% was noted for this asset class. Hotel properties followed in third place, with a share of about 11% (some €811m). Last year was marked by considerable yield compression, driving the premium returns on office and retail properties down to 3.9% and 3.7% respectively by the end of the year.
Above-average buying and selling activity on the part of foreign players
In 2015 an above-average proportion of both vendors and buyers on the market for commercial investment properties in Berlin came from outside Germany. Although international investors were the purchasers of some 58% of the volume traded, they sold slightly more, namely around 60% of the total. International investors comprised, above all, asset managers, REITs, and open-end/specialist funds. “Overseas asset managers advanced to take a 30% share of foreign investment activity, above all thanks to the purchase of the Potsdamer Platz ensemble,” remarks Ulrich Denk, investment consultant and researcher at Grossmann & Berger Berlin.
Open-end / specialist funds biggest buyers
Accounting for 22% of the total, open-end/specialist funds were more active on the buying side than asset managers (about 17.9%) and REITs (about 12.7%). They were followed by private investors (about 12%) before pension funds (about 10%) and insurance companies (about 8%). Other groups of investors each accounted for less than 5% of the total volume of transactions.
Asset managers are biggest vendors
When it came to selling, asset managers led with a 27% share of the total, followed by project developers with 12%. Sales by REITs/property AGs, open-end/specialist funds and closed funds each accounted for a market share of about 11% and 9% respectively. Other groups of sellers, including banks, owner-occupiers, insurance companies and pension funds each accounted for less than 5% of the total transaction volume.
Similar level of demand expected in 2016
In 2015 Berlin repeatedly demonstrated that it is an attractive target for international investors. The city obviously benefited in no small measure from its status as capital city and above-average economic growth. In 2016, however, there will be no one-off transactions like the “Potsdamer Platz Ensemble” portfolio sale. It is also to be presumed that fewer big-ticket pieces of real estate will come onto the market in 2015. Therefore the experts at Grossmann & Berger Berlin expect the year 2016 to close with a transaction volume of around €4.5bn - assuming the overall business environment remains good.