Invest Berlin 4Q2019

In 2019 the capital of the Federal Republic of Germany was the be-all and end-all for investors trading in commercial properties. Consequently, as Grosmann & Berger had predicted, for the first time ever an eleven-figure transaction volume was recorded, with a final total of some €11.1bn.  “Significantly increased capital values for office buildings are behind this astonishing result. In the space of only five years the average square-metre price of property in the city of Berlin has more than doubled to slightly over 6,000 euros,” says Holger Michaelis, managing director of Grossmann & Berger, a member of German Property Partners (GPP). “The previous record years of 2015 and 2017 owed their results to sales of portfolios costing over a billion euros each. In 2019, however, 30 properties sold at prices of over 100 million euros.”
 

Market details:

• Between 2018 and 2019 the transaction volume rose by 65 %. Following a 3rd quarter result of €3.3bn, the 4th quarter saw commercial property change hands for around €3.0bn. Each quarterly result in 2019 was thus either the highest or second-highest ever recorded in Berlin.
• In the 4th quarter alone, ten sales of real estate costing over €100m were added to the 22 transactions already noted in this price bracket. Their share of total sales thus rose year on year from 59 % to 63 % (some €7.0bn). PGIM Investments bought the Zalando high-rise “Stream” in Friedrichshain from Signa Holding for a mid-range nine-figure amount - the biggest transaction in the 4th quarter.
• Unusually for Berlin, portfolio trades accounted for only a little over a fifth (22%) of the sales volume, (2018: 18 %).
• Since 23 of the properties with price-tags of over €100m were office blocks, this asset class was the one investors favoured most and it generated 70 % of the total traded (2018: 58 %). Mixed use real estate ranked second with 15 % (2018: 7 %) and four properties sold at prices of over €100m each. Investors concentrated their attention on the Friedrichshain sub-market, where 25  % of trades were noted.
• Open-ended mutual property investment funds and professionals’ pension schemes/pension funds were the most active buyers (14 % each). International investors made up 51 % of the market (2018: 42 %). Project developers were especially active vendors (31%), followed by private investors (16 %).
• In view of current interest rate policies, real estate remains an attractive investment option even when yields are low. “Consequently, the prime yield on office properties has slipped from 3.0 to 2.7 per cent,” remarks Ulrich Denk, investment consultant and researcher at Grossmann & Berger.

 

Investment market | Berlin | 2019	Q1 -4
Volume of transactions [in €bn]	11.12
against prior yr [%]	+65
Share of trading in CBD [%]	24
Proportion of international investors [%]	52
Prime net yield, office [%]	2.7
against prior yr [percentage points]	-0.3
Prime net yield, commercial buildings [%]	2.8
against prior yr [percentage points]	-0.1
Prime net yield, logistics properties [%]	3.8
against prior yr [percentage points]	-0.4
Strongest asset class	Offices
Strongest asset class [%]	70

Selected top transactions | investments in Berlin | 1st to 4th quarters 2019

Project/property Street no.	Sub-market	Asset class	Buyer/investor	Vendor	Purchase price* [approx. €m]
“Oberbaum-City”, Rotherstrasse	Friedrichshain	Offices	Blackstone Group	UniCredit (HVB)	475
“Pressehaus am Alexanderplatz / New Podium”, Karl-Liebknecht-Strasse 27-29	Mitte	Offices	GEG German Real Estate Group	Tishman Speyer	340
“Fürst” (formerly “Kudamm-Karree”) Kurfüstendamm 206-209	Ku’damm plus side-roads	Mixed use	Vivion	Cells Bauwelt	confidential
“East-Side Tower”, Tamara-Danz-Strasse 1	Friedrichshain	Offices	Bayerische Versorgungskammer BVK and Allianz Real Estate	Edge Technologies	confidential
“Stream,” Zalando high-rise, Tamara-Danz-Strasse 7	Friedrichshain	Offices	PGIM Investments (for German professionals’ pension scheme)	Signa Holding	confidential
“B:HUB”, Kynaststrasse 13-15	Friedrichshain	Offices	JP Morgan Asset Management	SGI Immobilien Entwicklung und Verwaltung	confidential

*The purchase prices stated are based on publicly available data, where none is available an estimate is made; new transactions or those occurring in the quarter dealt with in this report are highlighted.
 
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