Investment market top-7 2Q2018

Trading keeps its sparkle

Press release | Hamburg

In the 1st half of 2018 the volume of investment transactions in commercial properties (excepting buy-to-let residential) in Germany’s top 7 cities totalled €14.05bn. This emerged from figures compiled by German Property Partners (GPP) and translates into robust year-on-year growth of 27%. Buyers concentrated on office properties, which accounted for 63% of the volume traded. This was, however, below the 70% share of the total seen a year ago. €2.81bn, or a fifth of the volume of transactions in the top 7 cities, involved property sales in the central business districts (CBD). This proportion was practically identical to last year’s. International investors accounted for about half of the volume sold. Year on year, their share of the market has thus grown further. Portfolio sales also took a larger slice of the market, although still modest at 10%. Without exception the top 7 cities saw falling prime yields on offices, commercial buildings and logistics properties. On office buildings in the top 7 locations the prime yield is now only 3.20%. This is also a reflection of the narrow range of variation in prime net yields throughout the top 7 cities, from 2.90% in Hamburg at one extreme to 3.50% in Stuttgart at the other.
"There has been no change in the dynamics of the investment market for commercial real estate we observed in the first quarter. At some locations the pace has noticeably accelerated, but without the shortage of properties results might have been better in places,” says GPP spokesperson Guido Nabben.
“There is plenty in the pipeline for the second half of the year. In coming weeks we expect to see several big-ticket transactions being concluded in nearly every one of the cities,” comments Nabben. “We expect the year 2018 to end with a total transaction volume of 29 billion euros in the top 7 cities.”
Top 10 known agreements | top 7 locations | Q1-2, 2018
City Project/property Buyer/investor Vendor Pur. price*
(about €m)
FFM Gutleutstrasse 116-124 (Local government centre) Aroundtown Wealthcap HFS Deutschland 500
HAM “Springer Quartier”, Sections A+B, Kaiser-Wilhelm-Strasse 16 Management company for professionals’ pensions, Hannover Momeni 400
FFM “Gallileo” Gallusanlage 7/ Kaiserstrasse Capitaland Commercial Trust (CCT) Fund managed by Triuva for South Korean investor 356
BER Hilton Berlin, Mohrenstrasse 30 Aroundtown Listed property investment companies - AG/REIT 297
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 Gerch Group State government Hesse 213
MUC “AVIVA”, Carl-Wery-Strasse 34 Korean state fund KGAL > 200
HAM “Sumatrakontor”, Überseeallee 1-3 REAL I.S. AG The Blackstone Group 190
FFM “TSK1”, Theodor-Stern-Kai 1 Credit Suisse The Blackstone Group Germany GmbH 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. Source: German Property Partners (GPP)
Top 7 locations | Q1-2, 2018
Transaction volume
in €m
2,300 2,450 1,160 725 3,227 860 3,332 14,054
Change against prior yr in % +70 -4 +25 -28 +43 +46 +37 +27
Prime yield*, offices
in %
2.90 3.00 3.30 3.40 3.30 3.50 3.00 3.20
Change against prior yr in percentage points -0.40 -0.20 -0.40 -0.40 -0.30 0.00 -0.20 -0.27
Prime yield*, commercial buildings
in %           
2.90 2.90 3.20 2.90 3.00 3.40 2.45 2.96
Change against prior yr in percentage points -0.40 -0.10 -0.30 -0.60 -0.40 -0.10 -0.25 -0.28
Prime yield*, logistics in % 4.60 4.40 4.60 4.50 4.40 4.50 4.20 4.46
Change against prior yr in percentage points -0.30 -0.70 -0.30 -0.40 -0.50 -0.60 -0.90 -0.53
asset class
Offices Offices Offices Offices Offices Mixed use Offices Offices
asset class in %
60 50 60 54 84 35 65 63
* Net initial yield; Source: German Property Partners (GPP)

Top 7 investment markets
  • The investment market in the city leapt by 70% year on year to reach a new record level of transactions totalling €2.30bn.
  • Four big-ticket transactions in excess of €100m each and a total of close to €1bn, such as the sale of the “Sumatrakontor” for some €190m, have turned Hamburg into the top 7’s current investment hotspot.
  • The prime net yield on office properties was 2.90%, lower than in any other top 7 location; in common with Düsseldorf and Cologne yields slipped by 0.40 percentage points and thus more than elsewhere.
  • With the volume of commercial properties traded rising by 46% to €860m, this state capital, like Hamburg, was a focus of investor interest in the 1st half of 2018.
  • Following a strong start to the year, the investment market lost some of its drive in the 2nd quarter. The sale of the SI Centre at Plieninger Strasse 100, for which Brookfield Asset Management paid Balandis and KC Holding some €145m, was one of two transactions in the three-figure millions bracket.
  • Stuttgart was the only one of the top 7 where the prime net yield on office properties ended the 1st half year as it started, at 3.50%.
  • Unlike the situation in other top locations, mixed used real estate was the type of asset preferred by investors, although by a slim margin of 35% to 34% office investments.
  • Above all, seven big-ticket transactions of over €100m each and a total of more than €1.50bn contributed to the strong growth of 43%, bringing the transaction volume to a total of €3.23bn. Four of these trades involved properties outside the CBD.
  • The biggest transaction registered in the 2nd quarter was the €356m sale of the “Gallileo” office block.
  • Core-plus properties accounted for a high proportion of the total traded, 30%, although a shortage of products is becoming noticeable in this segment too.
  • Office assets were more popular in Frankfurt than in any other of the top 7 locations, with a share of 84% of the total trading volume.
  • On the Munich investment market the 1st half year closed at €3.33bn, or 37% above the 1st half of 2017.
  • In the 2nd quarter trading in all asset classes remained very stable, continuing the dynamism of the 1st quarter. Only in respect of retail properties did the volume of investment decline.
  • With a share of 66% of the transaction volume, the Munich market was dominated by international investors.
  • Of the top 7 cities, Munich posted the lowest prime net yields on commercial buildings (2.45%) and logistics properties (4.20%).
  • The investment market in this state capital continues to attract investors, and the volume traded was €1.16bn (+25%).
  • Market activity is concentrated in B locations due to the scarcity of investment properties. No transactions in the CBD were registered in the 1st half of 2018; however, a large number of sales involved project developments and refurbishments.
  • Together with Cologne, Düsseldorf posted the highest share of portfolio transactions, which accounted for a fifth of the total traded.
  • The prime net yield on office properties slipped by 0.40 percentage points in Düsseldorf, thus contracting as sharply as in Hamburg and Cologne and more than in the other top 7 cities.
  • Brisk trading in the 2nd quarter compensated for the sluggish start to the year, so that by the end of the 1st half year the total value of commercial properties bought and sold was €2.45bn, only 4% below the prior year.
  • While yields in the CBD moved sideways - the prime net yield on offices was 3.00% - prime yields in the B locations trended upwards. Here real estate is on the market at price to annual income ratios that three years ago would only have been seen in the CBD.
  • International investors accounted for 65% of the Berlin market, topped only by the 66% recorded in Munich.
  • The shortage of available properties slowed the pace of transactions. With sales volumes down by 28% to €725m, Cologne returned the weakest result of the top 7 cities.
  • Portfolio transactions accounted for 20% of the volume traded and, together with Düsseldorf, the biggest share of such trades in the top 7.
  • Of all the top 7 locations Cologne saw the biggest fall in yields for commercial buildings, which dropped by 0.60 percentage points to 2.90%.
  • The biggest trade noted in Cologne to date was the sale of the Maritim Hotel at Heumarkt 20, for which Art-Invest paid Commerz Real some €120m in the 1st quarter. The next biggest trade took place in the 2nd quarter. Episo 4, a Tristan Capital fund, bought an office building on Sternengasse from MSC Objekt Köln Eins.

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Britt Finke

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