Coming after a lively rush of transactions completed at the end of 2015, the market for commercial investment properties in Germany’s top 7 locations started the year 2016 in very good shape. Calculations from German Property Partners
(GPP) show that by the end of the 1st quarter the volume of transactions (not including buy to let residential) totalled some €4.20bn. This translates into a year on year quarterly fall of 8.3%. “Compared with 2013 and 2014, when the volume of transactions was appreciably lower at some 3.5 billion euros, this latest result underlines the stable, robust condition of the German commercial property market at the present time,” remarks GPP spokesman Björn Holzwarth
.Transaction volume: Hamburg surprisingly strong
The volume of transactions did not rise everywhere, but a significant year-on-year change of more than 20% was noted in every location, the only exception being Munich.
The rise of 17% posted in Munich,
however, resulted in the highest volume of transactions, namely some €1.27bn. About 30% of this total was attributable to properties bought by WealthCap in the two biggest transactions announced in Munich.3 biggest known commercial property transactions top 7 locations, Q1, 2016
| City || Project/property || Investor || Vendor || Purchase price (€m) |
| MUC || Baywa Tower || WealthCap || Baywa/Competo || 280 |
| HAM || Telekom Campus || Amundi || TAS KG || 120 |
| MUC || Kistlerhofstraße 75 || WealthCap || JP Morgan || 100 |
Posting a transaction volume of around €900m, Hamburg
’s good 1st quarter result propelled the city to 2nd place, overtaking Berlin
with investments of some €680m. Whereas in Berlin
many transactions had already been completed by the end of 2015 and market activity was thus about 38% lower in the new quarter, Hamburg saw a rise of 20%. The major contribution to the total for Hamburg
was the sale of the Telekom Campus for around €120m, which was also the second-biggest transaction so far announced at one of the top 7 locations.
The biggest drop in the volume of transactions was recorded in Frankfurt
, where a total of €495m represented a 55% decline. Whereas in the same quarter of the prior year two sales in the three-digit millions were noted, the highest selling price in the 1st quarter of 2016 was well below €100m.
With growth of around 47%, the volume of transactions in Düsseldorf
reached €305m, approaching the figure seen in the quarter before the increase in the tax rate on real estate purchases in North Rhine-Westphalia.
The two smallest investment locations in terms of transaction volume are Stuttgart
(€303m) and Cologne
(€250m) but they closed the 1st quarter with the biggest growth rates among the top 7 cities – an increase of over 60% each.
Office properties comprised 65% of the real estate investment volume in the top 7 locations (€2.73bn) and hotels made up 10% (€411m). Just under three quarters of hotels sold were located in Frankfurt and Hamburg. “In the 1st quarter of 2016 portfolio transactions were practically irrelevant,” says Holzwarth
. This type of transaction accounted for 2% of the total (€86m).Returns: Ongoing slide
In view of the unchanged market parameters – excess of cash, shortage of properties and low interest rates – the decline in premium yields on office properties has not been halted in any of the top 7 locations. “In Munich and Berlin investors can now expect to see returns no higher than 3.50 and 3.90 per cent. In one isolated case in Munich, an investor was even prepared to accept less than 2.00 per cent,” reports Holzwarth
. “But investors are now thinking long and hard about whether they are willing to go along with these returns.”
The spread ranged between 4.00% in Hamburg, 4.25% in Stuttgart, 4.40% in Düsseldorf and Cologne and up to 4.60% in Frankfurt.Investors: International players active in Berlin and Düsseldorf
Unlike the same period of the prior year, international investors played a much smaller role in the top 7 cities, accounting for €1.19bn of the volume of transactions in commercial real estate. Their share declined from 42% to 28%. They were most in evidence in Berlin and Düsseldorf, accounting for 72% and 55% of the transaction volume respectively. “No noteworthy investments were made by Chinese buyers in the first quarter,” says Holzwarth
“Our assessment of the market and forecast made at the end of 2015 remains unaltered,” confirms Holzwarth
. “We are now observing that the need to find investment opportunities is being factored into the price of managed core and value-add properties. The ECB’s mid-March reduction of base rates to zero per cent is likely to squeeze returns even further. At times this results in investors holding properties for surprisingly brief periods. Rumour has is that there are plans to sell properties or shares in properties that were “flipped” only last year, such as the Trianon in Frankfurt.”Germany’s top 7 investment locations, 1st quarter of 2016
| || HAM || BER || DUS || CGN || FRA || STU || MUC |
| Transaction volume in € millions || 900 || 680 || 305 || 250 || 495 || 303 || 1,270 |
| Premium return office in % || 4.00 || 3.90 || 4.40 || 4.40 || 4.60 || 4.25 || 3.50 |
| Strongest asset class || Office || Office || Office || Office || Office || Office || Office |
| Strongest asset class in % || 66 || 84 || 78 || 76 || 55 || 63 || 68 |