Investment market top-7 3Q2016
Tav high but slipping
Press release
| Hamburg
04.10.2016
The volume of commercial property transactions (excluding buy to let investment) in Germany’s top 7 locations totalled some €16.44bn by the end of the 3rd quarter. This emerged from figures compiled by German Property Partners (GPP). Year on year, the result was lower by about 15%. In the 3rd quarter alone, commercial real estate changed hands for a total of around €7.05bn. “Against this backdrop, investment activity in Hamburg and Cologne proved to be gratifyingly consistent or rising,” says GPP spokesman Björn Holzwarth.
Transaction volume: Four cities post over 3 bn euros
In absolute terms, Berlin was the front runner at the close of the 3rd quarter, posting a transaction volume of €3.35bn. The 24% drop is, first and foremost, because this time, unlike the prior year, there was no outlier such as the sale of the Potsdamer Platz complex for €1.3bn.
Top 10 known agreements | top 7 locations | Q1-3, 2016
Following a somewhat muted 2nd quarter, transactions significantly gathered pace in Munich. GPP noted a total of seven transactions for over €100m each in the first nine months. Nevertheless, the result dropped by 20% to €3.30bn.
Hamburg held steady. With one transaction fewer than in the same period a year before, the result at the end of the 3rd quarter rose by 2% to €3.20bn. This result stemmed from five sales each involving over €100m.
Frankfurt joined Berlin in posting the biggest decline in the volume of transactions - a drop of 24%. Apart from the sale of the Commerzbank Towers for €680m, no other large trades or portfolio transactions were noted and the total trade in commercial real estate came to €3.01bn.
In Düsseldorf the 3rd quarter volume of transactions totalled €856m, well above the €671m returned for the entire 1st half year. Here too, however, the total result of €1.53bn translated into a modest fall of 9%.
Cologne, by contrast, returned 10% growth, the greatest rise in transaction volume noted in the survey. The city’s total was €1.10bn. Essentially, this was due to one trade for €350m. On behalf of several professional pension funds Warburg HIH Real Estate purchased three building lots on the MesseCity development site from Strabag Real Estate and ECE Projektentwicklung.
Stuttgart came very close to taking the billion euros hurdle with a total of €965m. Starting from a very high base, the volume of transactions fell by a modest 8%.
Returns: Ongoing compression
At the close of the 3rd quarter, prime yields on office properties in all top 7 cities were continuing on their downward trajectory. Yields ranged between 3.5% (Munich) and 4.25% (Frankfurt). The largest decline in the prime yield was a drop of 70 basis points in Stuttgart.
Investors: Fewer transactions by international players
In the first nine months of 2016 non-German investors spent around €5.86bn on commercial properties in Germany’s top 7 cities. Accounting for 36% of the market, they were less active than in the same period of 2015, when their share was 48%. As in the prior year, 66% of their interest remained focussed on the German capital of Berlin.
Outlook
“The last quarter of the year will be very lively. Despite several large real estate transactions now at the negotiation stage, it looks as if the year will end with a total of some 25 billion euros, and thus well below the 28 billion returned last year,” thinks Holzwarth. “Lack of properties and deep pools of cash are leading to fiercer competition and a growing willingness to take risks. Brexit, the US presidential elections in November and developments in China could further aggravate the situation by funnelling more capital into Germany.”
Top 7 locations | Q1-3, 2016
Source: German Property Partners
In absolute terms, Berlin was the front runner at the close of the 3rd quarter, posting a transaction volume of €3.35bn. The 24% drop is, first and foremost, because this time, unlike the prior year, there was no outlier such as the sale of the Potsdamer Platz complex for €1.3bn.
Top 10 known agreements | top 7 locations | Q1-3, 2016
| City | Project/property | Buyer/investor | Vendor | Pur. price (€m) |
| FFM | Commerzbank Tower | Samsung SRA Asset Management | Commerz Real | 680 |
| FFM | ibc, Theodor-Heuss-Allee 70-74 | GEG German Estate Group | RFR Gruppe | 400 |
| CGN | 3 building lots, MesseCity | Warburg HIH RE for several pension funds | Strabag Real Estate, ECE Projektmanagement | 350 |
| MUC | Baywa-Tower, Arabellastrasse | WealthCap | Baywa/Competo | 280 |
| MUC | Karstadt Main Station | RFR Holding | Tristan Capital, Signature Capital | 250 |
| BER | Base building, Treptowers | Blackstone, Quantum | Alstria Office REIT | 230 |
| CGN | 7 properties in the Technology Park | EQT real estate | LHI funds | 188 |
| BER | Park Inn by Radisson Berlin Alexanderplatz | FDM Management | Brookfield Properties/Starwood Capital | n/a |
| BER | The Westin Grand Berlin | FDM Management | Brookfield Properties/Starwood Capital | n/a |
| HAM | Alter Wall 2-32 (share deal) | Versorgungswerk Ärztekammer Hamburg (doctors’ pensions) | Art-Invest | n/a |
Following a somewhat muted 2nd quarter, transactions significantly gathered pace in Munich. GPP noted a total of seven transactions for over €100m each in the first nine months. Nevertheless, the result dropped by 20% to €3.30bn.
Hamburg held steady. With one transaction fewer than in the same period a year before, the result at the end of the 3rd quarter rose by 2% to €3.20bn. This result stemmed from five sales each involving over €100m.
Frankfurt joined Berlin in posting the biggest decline in the volume of transactions - a drop of 24%. Apart from the sale of the Commerzbank Towers for €680m, no other large trades or portfolio transactions were noted and the total trade in commercial real estate came to €3.01bn.
In Düsseldorf the 3rd quarter volume of transactions totalled €856m, well above the €671m returned for the entire 1st half year. Here too, however, the total result of €1.53bn translated into a modest fall of 9%.
Cologne, by contrast, returned 10% growth, the greatest rise in transaction volume noted in the survey. The city’s total was €1.10bn. Essentially, this was due to one trade for €350m. On behalf of several professional pension funds Warburg HIH Real Estate purchased three building lots on the MesseCity development site from Strabag Real Estate and ECE Projektentwicklung.
Stuttgart came very close to taking the billion euros hurdle with a total of €965m. Starting from a very high base, the volume of transactions fell by a modest 8%.
Returns: Ongoing compression
At the close of the 3rd quarter, prime yields on office properties in all top 7 cities were continuing on their downward trajectory. Yields ranged between 3.5% (Munich) and 4.25% (Frankfurt). The largest decline in the prime yield was a drop of 70 basis points in Stuttgart.
Investors: Fewer transactions by international players
In the first nine months of 2016 non-German investors spent around €5.86bn on commercial properties in Germany’s top 7 cities. Accounting for 36% of the market, they were less active than in the same period of 2015, when their share was 48%. As in the prior year, 66% of their interest remained focussed on the German capital of Berlin.
Outlook
“The last quarter of the year will be very lively. Despite several large real estate transactions now at the negotiation stage, it looks as if the year will end with a total of some 25 billion euros, and thus well below the 28 billion returned last year,” thinks Holzwarth. “Lack of properties and deep pools of cash are leading to fiercer competition and a growing willingness to take risks. Brexit, the US presidential elections in November and developments in China could further aggravate the situation by funnelling more capital into Germany.”
Top 7 locations | Q1-3, 2016
| HAM | BER | DUS | CGN | FFM | STU | MUC | Top 7 | |
| Transaction volume in €m | 3,200 | 3,350 | 1,527 | 1,100 | 3,006 | 965 | 3,295 | 16,443 |
| Change against prior yr in % | + 2 | - 24 | - 9 | + 10 | - 24 | - 8 | - 20 | - 15 |
| Prime yield, office in % | 3.80 | 3.70 | 4.20 | 4.00 | 4.25 | 3.80 | 3.50 | - |
| Strongest asset class | Offices | Offices | Offices | Offices | Offices | Offices | Offices | - |
| Strongest asset class in % | 67 | 57 | 56 | 79 | 78 | 70 | 67 | - |
Source: German Property Partners
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