Investment market top-7 1Q2017

Flying start to new year

Press release | Hamburg

In the 1st quarter of 2017 the volume of investment transactions in commercial properties (excepting buy-to-let residential) totalled €4.92bn in Germany’s top 7 locations - Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich. German Property Partners (GPP) reports that this represents 17% growth. “This means that the new year got off to a brisker start than in the past four years, although there were some visible differences between regions”, comments Björn Holzwarth, spokesman for German Property Partners.
Transaction volume: Cologne and Berlin gain most
At the end of the 1st quarter the transaction figures painted a fairly novel picture. While Cologne posted an increase of 76%, thus edging even Berlin aside (+74%), Frankfurt and Munich were in the mid-range, with +38% and +36% respectively. In Düsseldorf the volume of sales remained almost static, with a plus of 1%, whereas the year on year results in Hamburg and Stuttgart were lower by 48% and 72% respectively.
Several big-ticket transactions in the 1st quarter helped lift Cologne into third place among the top 7 locations, with a total of €440m. One such transaction was the sale of the commercially used parts of the Gerling Quarter in the city centre, which Quantum and Proximus purchased from Immofinanz for an estimated €200m.
Top known agreements for €100m or more | top 7 locations | Q1, 2017
City Project/property Buyer/investor Vendor Pur. price
(about €m)
MUC Kap West, Friedenheimer Brücke Allianz OFB well over
> 200
HAM Radisson Blu Dammtor, Marseiller Strasse 2 Wenaasgruppen Azure Property Investments 200
CGN Gerling Quartier Quantum, Proximus Immofinanz estimated 200
MUC Highrise One, Rosenheimer Strasse Deka Immobilien Reiß & Co. 160
MUC Georg-Brauchle-Ring Europa Capital/Bayern Projekt Pension fund 150
MUC H2O BNP Paribas REIM Wöhr & Bauer 112
BER Puschkinallee 52 Bundesanstalt für Immobilienaufgaben (Federal real estate) Taunus Holding n/a
BER Rocket Tower, Kochstrasse 22 Open-end fund managed by Amundi JP Morgan Asset Management n/a
Berlin also benefited from the conclusion of several big-ticket transactions. These were already in the pipeline in 2016, but were not finalized until this year. Thus the investment market in the capital has developed especially well, as was expected, reaching a total volume of €1.18bn. The biggest sales included the former headquarters of Vattenfall (Puschkinallee 52), which Taunus Holding sold to the Federal real estate corporation Bundesanstadt for Immobilienaufgaben, and the Rocket Tower (Kochstrasse 22), which Amundi acquired for an open-end fund from JP Morgan Asset Management.
Although no properties costing more than €100m were sold, Frankfurt’s total volume of transactions was €714m. The two most expensive properties were sold for €90m and €75m. The more costly sale was the transfer of Bockenheimer Landstrasse 25 from Triuva and Office First Immobilien to Aberdeen; the other was that of the Fiat Chrysler headquarters (Hanauer Landstrasse 150) to Next Estate Income Fund II.
At the end of the 1st quarter Munich once again took its place as the prime German location for investments in commercial properties, with transactions totalling €1.72bn. This result was also the best 1st quarter seen in recent years. Essentially, this was due to four sales for over €100m each, which together accounted for some 40% of the total turnover for the quarter, plus a large number of sales at prices between €30m and €80m.
Düsseldorf’s strength lay in the price segment of €50m and less. However, due to a lack of properties selling for over €100m, Düsseldorf, capital of the state of North Rhine-Westphalia, returned a result of €307m and thus only a small improvement on the prior year’s quarter.
In Hamburg the number of transactions fell from 36 a year before to 14, reaching a sales total of €470m; in the wake of a very strong performance in 2016, this was the worst start to a year since 2011. One transaction alone, the 1st-quarter sale of the Radisson Blu Dammtor hotel for €200m, accounted for 43% of the total Hamburg result.
Following an extremely strong 4th quarter, the Stuttgart investment market started the new year with a disproportionately low volume of transactions, totalling €84m. “Since numerous big-ticket transactions are nearing finalization, we expect the coming quarters to return much higher figures in Stuttgart, as we expect to see in Düsseldorf and Hamburg too,” remarks Holzwarth.
Yields: A growing convergence
In all top 7 locations the prime yield on office properties was more than 3 and less than 4 per cent at the end of the 1st quarter. The prime yields for office properties were lowest in Munich and Berlin at 3.2%. Frankfurt was at the top of the scale with 3.90%. Apart from Munich, where the prime yield was unchanged, every other city saw further slippage. German Property Partners registered the biggest drop - 60 basis points - in Cologne.
The prime yields on commercial buildings diverged to a greater extent. Whereas they rose by 10 basis points in Frankfurt, they remained stable in Munich. The largest decline was a drop of 30 basis points in Hamburg, Berlin and Stuttgart. Yields varied between 2.70% in Munich and 3.60% in Cologne.
The prime yields for logistics and industrial properties in the top 7 locations are growing increasingly similar. At the end of the 1st quarter the range of yields had narrowed to between 4.90% in Hamburg and Düsseldorf to 5.20% in Frankfurt. Year on year, yields fell in every city, most of all in Hamburg, with a drop of 50 basis points.
Investors: International players tending to hold back
In the 1st quarter of 2017 investors from abroad looking to acquire properties in the top 7 locations spent €1.44bn. Their share of the transaction volume was 29%, barely different from the 28% registered a year ago. Accounting for 6% and 8% of the totals respectively, foreign investment activity was below average in Stuttgart and Munich. In Hamburg nearly two-thirds of the transaction volume was attributable to international players, as may be seen from the Radisson Blu Dammtor hotel investment, sold by its Luxembourg owner to Norwegians.
“People have recovered from the shock of the US election; the UK has formally applied to leave the EU. And investors have realized that they still have a vast pile of capital. Perhaps that explains why the trade in commercial property investments in Germany is so high, despite an ongoing lack of properties and steadily falling yields,” says Holzwarth summing up the 1st quarter. “Yields will probably continue to drift downwards in 2017, even if the market parameters do not change a great deal. What could happen is that the market slows down.”
Top 7 locations | 1st quarter of 2017
Transaction volume
in €m
470 1,180 307 440 714 84 1,723 4,919
against prior yr in %
-48 +74 +1 +76 +38 -72 +36 +17
Prime yield*
offices in %
3.30 3.20 3.70 3.80 3.90 3.50 3.20 -
Prime yield* commercial buildings in % 3.30 3.00 3.50 3.60 3.50 3.30 2.70 -
Prime yield*
logistics in %
4.90 5.10 4.90 5.00 5.20 5.10 5.10 -
asset class
Hotel Offices Offices Offices Offices Offices Offices -
asset class in %
50 71 56 45 96 46 69 -
* Net initial yield

Source: German Property Partners

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