Investment market top-7 3Q2017

Racing down the home stretch


Press release | Hamburg
04.10.2017


The volume of investment transactions in commercial properties (excepting buy-to-let residential) in Germany’s top 7 cities is set to end the year 2017 close to the 30 billion euro mark. German Property Partners (GPP) has calculated a transaction volume of €20.5bn for the first three quarters of the current year. Compared with the €16.7bn noted for the same period of 2016, this translates into growth of 23%. The forecast total for the entire year is around €30bn and thus slightly higher than the total in 2016 when the 4th quarter proved extremely strong.
 
“Thus for the third year in succession we will attain a transaction volume far higher than the long-term average. Considering that various property-sale negotiations are at an advanced stage and could well be finalized this year, the total might be even higher,” says Guido Nabben, spokesperson for German Property Partners. “The unabated run on German real estate is fuelled by national and international investors. Even though some owners have used the 2017 market to sell properties that have risen in value, demand remains far in excess of supply.”
 
Top 7: Office transactions dominate, yields drift down further
In the first three quarters the office sector accounted for the lion’s share of transactions - €14.8bn (+34 % compared with the same period a year before). The volume of transactions in hotel properties was €1.8bn (+20 %) inching past the retail sector (€1.7bn, -9 % year on year) in third place. The proportion of transactions completed by international investors grew appreciably from 35% to 51%; portfolio trades likewise grew in the first three quarters of 2017 to take a 23% share, well above the figure in the prior year (13%).
 
Year on year the average net prime yields in the top 7 cities slipped further, with the return on office properties down to 3.4% and that on commercial buildings to 3.2%. The decline in yields was especially marked in the case of logistics properties (Berlin not included), falling by nearly a fifth to an average of 4.2%.
 
Individual markets: Sony Center pushes Berlin market to new record high
In the first three quarters of the current year Berlin recorded both the highest transaction volume and the biggest year-on-year rise of all the top 7 cities. The total of €6.0bn represented an increase of 79% over the first three quarters of 2016, and the best ever figure recorded in Berlin at the end of a 3rd quarter. Three large transactions completed in the 3rd quarter played an essential role here; first, the Sony Center was bought for €1.1bn by an Oxford Properties consortium. The second biggest trade in the capital was the sale of the Axel-Springer Media Campus, for which a Norwegian pension fund paid the A-S publishing house €425m; the third was the Axel-Springer-Passage, a mall sold by Axel Springer to a Blackstone fund for €330m. The net prime yield on Berlin office properties fell to 3.1%, on commercial buildings it fell to 3.0%.
 
The Cologne market was also very dynamic in the first three quarters. At €1.5bn the transaction volume was 36% higher than in the same period of the prior year. Several properties were sold for prices in the triple-digit million range, for example the 1st quarter transaction involving the Gerling Quarter (Christophstrasse, Hildeboldplatz) sold by Immofinanz for €200m to Proximus and Quantum. Year on year the net prime yield contracted further to 3.8% (offices) and 3.5% (commercial buildings).
 
In Munich the volume of transactions rose year on year by 27% to a total of €4.2bn. Five big-ticket transactions for prices in excess of €100m accounted for €1.1bn and were all recorded in the strong 3rd quarter. One of the five was the sale of Kustermann-Park (Rosenheimer Strasse) which BlackRock bought from ARES for €280m. In Munich the net prime yields on offices and commercial buildings fell to the lowest levels ever seen in any of the top 7 cities, reaching 3.0% and 2.5% respectively.
 
In Frankfurt commercial properties valued at €3.9bn were sold in the first nine months of 2017, a year-on-year increase of 19%. Here the biggest transactions include the sale of the Grand Central development in the Gutleut district (Adam-Riese-Strasse, Hafenstrasse) which Gross & Partner and Phoenix Real Estate Development sold to the asset manager and fund initiator Amundi for some €300m and of the Eschborn Plaza (Mergenthalerallee, Eschborn), purchased by a consortium of international insurance companies and pension funds for about €236m. Latter property was sold by the CFB 159 real estate fund managed by Commerz Real. Net prime yields on both offices and commercial buildings were 3.6%.
 
Totalling €1.7bn the volume of transactions completed in Düsseldorf was 14% higher than that in the prior year. Whereas in the 1st half of the year smaller transactions for under €50m predominated, the 3rd quarter was marked by a few, but large trades. These included the Uniper headquarters (E.ON Platz) which the company sold for just under €100m to an opportunity fund managed by JP Morgan Asset Management Europe and Indigo Invest Holding, and the Business Campus am Park (Werdener Strasse) for which GEG German Real Estate Group paid Cetus Immobilien slightly over €80m. Year on year the net prime yields in Düsseldorf slipped a little to 3.7% on office properties and 3.5% on commercial buildings.
 
In Stuttgart the volume of transactions totalled €929m and thus remained 4% behind the comparable figure for 2016 of €965m. Among the biggest transactions thus far in 2017 were Conrenland’s €106m sale of the City Plaza office blocks to Zurich Insurance (Rotebühlplatz) and the sale by AEW of the property on Friedrichstrasse 10 / Kronenstrasse to Aviva for €70m. The net prime yields have settled at 3.5% (offices) and 3.3% (commercial buildings).
 
The lack of available properties was the main reason for the appreciable fall in Hamburg’s volume of transactions. Year on year, the total volume of €2.3bn translated into a 28% decrease. The biggest sale in the city was that of the Radisson Blu Dammtor for some €200m. This hotel (Marseiller Strasse) was sold in the 1st quarter by the asset manager Azure Property to a private Norwegian investor, Wenaasgruppen. The net prime yields in Hamburg were noticeably lower than the average of all top 7 cities, at 3.1% for offices and 3.0% for commercial buildings.
 
Outlook
“We expect to see brisk business during the final quarter of the year in all 7 top cities, because in each of them there are still some larger transactions in the pipeline,” says Nabben. “There are thus plenty of topics for conversation at this year’s Expo Real”.
 
 
Top 10 known agreements | top 7 locations | Q1-3, 2017
City Project/property Buyer/investor Vendor Pur. price*
(about €m)
BER Sony Center, Potsdamer Platz Oxford Properties NPS Korea 1,100
BER Axel-Springer-Media campus, Axel-Springer-Strasse 64 Norwegian Government Pension Fund Global Axel Springer Verlag 425
BER Axel-Springer-Passage, Axel-Springer-Strasse 66 Blackstone Group Deutschland GmbH Axel Springer Verlag 330
FFM Grand Central (office section), Adam-Riese-Strasse/Hafenstrasse 51 Amundi Groß & Partner/Phoenix Real Estate Development  300
MUC Kustermann-Park, Rosenheimer Strasse BlackRock ARES 280
FFM Eschborn Plaza, Mergenthalerallee 1-5 Aurec/Migdal Insurance Group/Pensionsfonds Bank Leumi/Halman Aldubi/DI Insurance CFB 159 236
MUC Kap West, Friedenheimer Brücke Allianz OFB 225
HAM Radisson Blu Dammtor, Marseiller Strasse 2 Wenaasgruppen Azure Property  200
CGN Gerling Quartier, Christophstrasse / Hildeboldplatz Proximus and Quantum Immofinanz 200
MUC loopsite, Werinherstrasse Amundi Quincap Investment / Blackstone 190
* The purchase prices stated are based on publicly available data, where none is available an estimate is provided
Source: German Property Partners
 
 
Top 7 locations | Q1-3, 2017
  HAM BER DUS CGN FFM STU MUC Top 7
Transaction volume
in €m
2,300 6,000 1,740 1,500 3,848 929 4,173 20,490
Change
against prior yr in %
-28 +79 +14 +36 +19 -4 +27 +23
Prime yield*, office in % 3.10 3.10 3.70 3.80 3.60 3.50 3.00 3.40
Prime yield*, com-mercial buildings
in %
3.00 3.00 3.50 3.50 3.60 3.30 2.50 3.20
Prime yield*, log-istics in % 4.60 - 4.95 4.90 5.00 5.00 4.75 4.20
Strongest
asset class
Offices Offices Offices Offices Offices Offices Offices -
Strongest
asset class in %
58 77 75 39 93 88 60 -
* Net initial yield
Source: German Property Partners

Press contact

Visitenkarte Xing
Britt Finke


Bleichenbrücke 9
20354 Hamburg

b.finke@grossmann-berger.de

040-350 802 993
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