Investment Hamburg 3Q2015

Volume of transactions approaching the €4 bn mark

Press release | Hamburg

In an investment-friendly climate, transactions continued to soar in the 3rd quarter of the year in Hamburg. The 3rd quarter closed at around €1.2 bn, on a par with the prior quarter’s high total. Overall, since the beginning of the year, commercial properties valued at just under €3.2 bn changed hands. “The 31% increase in turnover compared with the year before indicates the dynamic state of market. The volume of transactions is on course to reach the €4 bn mark by the end of the year, which would be the highest figure seen since 2007,” comments Axel Steinbrinker, managing director of Grossmann & Berger.

Investment Hamburg 3Q2015Investment Hamburg 3Q2015
Dynamic development in City South/St. Georg with nine sales
Transactions focussed on the sub-markets in central locations - City, City South/St. Georg and HafenCity- which accounted for around two thirds of the total volume. Hamburg City alone registered a share of 36%. Altogether 30 properties changed hands in this sub-market. The biggest 3rd-quarter transaction in City was the sale of the former headquarters of the Axel Springer publishing house, sold by its eponymous owners to project developer MOMENI. As part of its restructuring plans Axel Springer had already sold the “C” section of the complex in February to the City of Hamburg. “The legal finalization of the sale of sections “A” and “B” is further evidence that Hamburg City is full of potential for developers. Large-scale projects such as this one or the neighbouring “Stadthöfe” are important elements in the ongoing development of the inner city and thus contribute to the sustainable value of the location,” explains Steinbrinker. With around 20% of total turnover, City South/St. Georg placed second in the table of sub-markets. In the 3rd quarter the location generated its own special dynamism. In the 3rd quarter alone, some nine commercial buildings were sold in this district. Sales included the “Berliner Tor Centre” office complex with some 80,000 m² of office space, for which the Zurich Gruppe Deutschland paid a fund managed by Morgan Stanley Real Estate Investing about €270m; to date this is the biggest single-property sale of the year 2015.

Roughly a third of the transaction volume relates to portfolio sales
As in the past, office properties were the biggest-selling asset class, accounting for over 70% of the total. In the first three quarters of the year there were appreciably more portfolio transactions, with five fairly large bundles of office buildings sold. With a year on year increase of about 33%, portfolio sales accounted for a significantly larger share of total trades. In the first two quarters, for example, Norrporten sold a package of three office blocks in HafenCity, “S-KAI”, “Hamburg-America-Center” and “Coffee Plaza”, to Pembroke Real Estate and three Hamburg office properties held in Credit Suisse’s “Odin Portfolio” were sold to Orion Capital Managers for a total of some €200m. In the 3rd quarter the German portfolio held by GE Capital was sold to Kildare Partners, a British private equity company. A small portion of the 60 buildings in the commercial property portfolio are in Hamburg.

Investments in hotel and retail properties were almost equal in size, at €256m and €234m respectively. One of the biggest hotel trades was completed in the 1st quarter, when Hochtief sold the new project development “Height 3” on the former “Spiegel Island” (Willy-Brandt Strasse 23, City) to Commerz Real for the boarding house concept operated by Adina Apartment Hotels.

Premium returns have remained stable when compared with the prior quarter. Year on year the premium return for office and retail properties slipped by a further 20 base points to 4.3%, the premium return for warehouse, logistics and industrial properties fell from 7.2 to 6.5%. “Shrinking returns are an expression of the current state of the market in Hamburg. Property owners should investigate whether or not to seize the present market situation and cash in on the increased market values generated by the process of yield compression,” advises Steinbrinker.

Both national and international investors very active
International investors were very active in the market, accounting for around 52% of the volume of commercial properties in Hamburg traded as investments. Many of the investors came from the UK, France and Switzerland. National investors were slightly less in evidence, their share fell from 54% to about 48%. Foreign investors also increased their share of property sales from about 41% to 49%.

On the buying side of the equation, asset managers were the single biggest group of investors with an outlay of €734m or 23 % of the total transaction volume. Open-end/specialist funds took the second-highest share with €627m, or 20 % of the total. The top-ranking group of vendors were the open-end/specialist funds which sold commercial real estate in Hamburg for around €942m, accounting for a 30% share of the transaction volume.

Outlook 2015
“We anticipate that the year will end with a considerable increase in the volume of transactions for a total of at least €4bn. And in the year ahead, we expect to see brisk trading on the market for investment in Hamburg real estate, provided there are no fundamental changes in the business environment,” says Steinbrinker.

The complete investment market survey Hamburg will soon be available for download on our website.

Permission is given to reproduce the chart (source: Grossmann & Berger).

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Britt Finke

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