Investment market top-7 1Q2018

Off to a perfect start

Press release | Hamburg

In the 1st quarter of 2018 the trading in commercial properties (excepting buy-to-let residential) was very brisk in Germany’s top 7 cities - Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich. German Property Partners (GPP) has calculated that the volume of transactions totalled some €7.0bn. This translates into an increase of 36 % compared with the prior year - although here too the 1st quarter showed high trading volumes. GPP spokesperson Guido Nabben remarks that, “It has been a long time since there was so much market activity at the start of a year. Most cities returned above-average results, and Hamburg even posted a new record.”
Top 7: Office transactions predominate, yields still contracting
In the 1st quarter the office sector accounted for the lion’s share of transactions - €4.5bn (+33 % compared with the same period a year before). Although hotel property trades rose by 29 %, the sector placed a distant second with a total transaction volume of €665m. Year on year, the proportion of transactions completed by foreign investors rose a little, from 27 % to 30 %. Portfolio trades accounted for a mere 6 % of the transactions in the first three months. In 2017 their share had been 18 %.
In the top 7 cities the average prime net yields on office properties (3.23 %) and on commercial buildings (2.99 %) slipped only a little compared with the end of 2017, dropping 3 and 7 basis points respectively. The yield decreased more appreciably on logistics properties. Compared with the 4th quarter of 2017 the prime net yield contracted by 24 basis points to 4.46 %.
Individual markets: Strong opening in Stuttgart, Hamburg on track for record
Stuttgart posted by far the biggest increase in the volume of transactions. Compared with the disproportionately weak result in the same period a year before, the total grew by an enormous 534 %, to end the 1st quarter on €535m. This huge difference is partly because some transactions which had been slated for the 4th quarter of 2017 were not completed until the new year. The biggest transaction involved the sale of the former railway company headquarters (Heilbronner Strasse / Jägerstrasse). The Stuttgart development firm W2 and the Munich investment company Competo Capital Partners sold this redevelopment site for a price thought to be over €100m to developer and builder P+B Planen und Bauen. The consolidated prime net yields in the 1st quarter were 3.50 % on office properties and 3.40 % on commercial buildings.

Hamburg closed the 1st quarter with a record volume of transactions totalling €1.3bn. This translates into a year on year increase of 177 % and is thus the best 1st-quarter result ever recorded in Hamburg. The “Springer Quartier” (Kaiser-Wilhelm-Strasse) played a crucial role in this, being sold by the developer Momeni to a company managing pensions for various professions for a price of some €400m. The second biggest trade in Hamburg involved the “LaHoMa” in Langenhorn, a new build sold for over €100m by property company Matrix Immobilien. Properties in Hamburg’s CBD (central business district) accounted for close to 40 % of the entire volume of transactions. Compared with the 1st quarter of 2017 the prime net yields fell to 2.90 % on both office properties and commercial buildings, but were unchanged against the end of 2017. High demand in the logistics sector drove the prime net yield down to only 4.20 %.
Trading was also very brisk during the 1st quarter in Düsseldorf. This city on the Rhine returned a year-on-year increase of 82 %, reaching a total of €560m. Several transactions planned in the 4th quarter of 2017 were postponed until the new year. The largest sale was that of an office property; developer Art-Invest sold the “Fürst & Friedrich” (Fürstenwall / Friedrichstrasse) for about €110m to a special fund managed by M&G Real Estate. Prime net yields on both offices and commercial buildings were 3.4 %.
Thanks to several big-ticket trades in the 1st quarter Frankfurt recorded the second-highest trading volume of the top 7 cities, with total sales of some €1.4bn (+47 % year on year). The foremost transaction concerned the local government centre (Gutleutstrasse 112-138) which Wealthcap HFS Deutschland, a closed property fund, sold to the property company Aroundtown for about €500m. The second-biggest trade was the sale of the old police headquarters (Friedrich-Ebert-Anlage / Mainzer Landstrasse) for which the developer Gerchgroup paid the state government of Hesse some €213m. The prime net yield has settled at 3.3 % on office properties and 3.0 % on commercial buildings.
Munich was the top-ranked city of the top 7; this city, the country’s most important market for investment in commercial properties, recorded total trades of some €2.0bn in the 1st quarter. Year on year, the Bavarian capital thus boosted its result by 14 %. Six transactions, each with price-tags of more than €150m, contributed 64 % to yet another strong result for the city. These trades included the Postbank’s sale of the “Correo-Quartier” in Munich’s centre to Credit Suisse (about €275m) and the “SZ Towers” at Hultschiner Strasse 8, which fund management firms Axa Real Estate Investment Managers and Norges Bank Real Estate Management sold to Art-Invest (about €244m). The prime net yields remained unchanged from their levels at the end of 2017 at 3.00 % on office properties and 2.45 % on commercial buildings.
One large property transaction had a particularly big impact on the Cologne investment market; Art-Invest bought the Maritim Hotel (Heumarkt 20) from a closed fund managed by CommerzReal for about €120m. Largely due to this trade, more than 50% of the total transactions concerned properties in the city centre and, moreover, hotel properties emerged as the biggest-selling asset class, ahead of the office sector. Overall, Cologne recorded total trades of €400m and therefore fell 9 % below the prior year’s figure. The prime net yields on office properties fell to 3.50 % and to 2.90 % on commercial buildings.
Berlin started the new year somewhat sluggishly. Towards the end of last year very few properties for sale were on the market at all, and the volume of transactions in the first three months of this year has accordingly dropped by some 27 % year on year to €860m. Meanwhile, however, renewed selling activity has been noted and it is therefore to be expected that the volume of transactions will rise appreciably from the 2nd quarter onwards. The prime net yield was 3.00 % on office properties and 2.90 % on commercial buildings.
“The high volume of trading in the first quarter shows that investors are still confident. Despite the shortage of properties and low yields, the investment markets look set to see brisk trading on a par with the past year,” forecasts Nabben. “Yields are no longer falling so fast and in many places they would appear to be stabilising on a low base.”
Top 10 known agreements | top 7 locations | Q1, 2018
City Project/property Buyer/investor Vendor Pur. price*
(about €m)
FFM Local government centre, Gutleutstrasse 116-124 Aroundtown Wealthcap HFS Deutschland 500
HAM Springer Quartier, Sections A+B, Kaiser-Wilhelm-Strasse 16 Gesellschaft berufsständischer Versorgungswerke (professional pensions) Momeni 400
MUC Correo-Quartier, Paul-Heyse-Strasse/Bayerstrasse/Schwanthalerstrasse Credit Suisse Postbank 275
MUC SZ-Tower, Hultschiner Strasse 8 Art-Invest Axa Real Estate Managers / Norges Bank Real Estate Management 244
FFM Old police headquarters, Friedrich-Ebert-Anlage/Mainzer Landstrasse Gerchgroup State government Hesse 213
MUC AVIVA, Carl-Wery-Strasse 34 Korean state fund KGAL 200
FFM Sheraton, Hugo-Eckner-Ring 15 Precise Hotels & Resorts Blackstone 122
CGN Maritim Hotel, Heumarkt 20 Art-Invest CommerzReal 120
DUS Fürst & Friedrich, Fürstenwall/Friedrichstrasse M&G European Property Fund Art-Invest 110
STU Old railway company headquarters, Heilbronner Strasse/Jägerstrasse P+B Gruppe Competo Capital Partners GmbH / W2 Development GmbH > 100
* The purchase prices stated are based on publicly available data, where none is available an estimate is taken; source: German Property Partners (GPP)
Top 7 locations | Q1, 2018
Transaction volume
in €m
1,300 860 560 400 1,386 535 1,961 7,002
against prior yr in %
+177 -27 +82 -9 +47 +534 +14 +36
Prime yield*, office in % 2.90 3.00 3.40 3.50 3.30 3.50 3.00 3.23
Prime yield*, com-mercial buildings
in %
2.90 2.90 3.40 2.90 3.00 3.40 2.45 2.99
Prime yield*, logistics in % 4.20 4.50 4.60 4.50 4.50 4.50 4.40 4.46
asset class
Offices Offices Offices Hotel Offices Offices Offices Offices
asset class in %
51 59 65 50 89 40 69 64
* Net initial yield; source: German Property Partners (GPP)

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