The market for commercial properties in Hamburg has soared in 2014. Calculations by Grossmann & Berger show that in the 3rd quarter the volume of transactions fell just short of the billion-euro mark (950m €), rising well above the results of the first two quarters, which were 575 and 875m €. With transactions totalling 2.4bn €, the result had already surpassed the ten-year average of 2.35bn € by the end of the 3rd quarter. “In the third quarter alone three properties were sold at prices of 100+ million euros each, following two transactions in this category in the first half year,” comments Christoph Ringleben, managing director at Grossmann & Berger. “Interestingly enough, the two biggest transactions were in the St. Pauli district, with the sale of two flagship properties, the 'Dancing Towers' and the 'Atlantic House'”.
Biggest transactions in St. Pauli
At the close of the 3rd quarter of 2014 it was apparent that the most popular investment locations were the central sub-markets City and HafenCity, which accounted for around 39% of the transaction volume. The two biggest transactions in these sub-markets were the sale of the Karstadt Sports building (Lange Mühren 14, City) and the “Sumatrakontor” (Überseeallee 1-3, HafenCity), both concluded in the 2nd quarter. Thanks to the two transactions involving the most expensive properties so far in 2014, St. Pauli was the next-biggest sub-market, with a share of 14% of the total. The project developer Strabag Real Estate sold the “Dancing Towers” (Reeperbahn 1, St. Pauli) for some 165m € to a specialist fund managed by Hansainvest and UBS sold the “Atlantic House” office building (Bernhard-Nocht-Strasse 113/Zirkusweg 1-3, St. Pauli) to the Swedish pension fund Cityhold for around 130m € in what were the two biggest transactions so far.
Returns falling across all asset classes
In the first three quarters of the year, a majority of investors focussed on office properties, with the result that this asset class made up some 68% of the transaction volume of about 1.67bn €. Four out of five properties bought and sold for over a hundred million euros were office buildings. Retail properties were the second most popular assets, albeit transactions in this sector accounted for the much lower total of about 430m €. Their share of the total volume was around 18 %. The 2nd-quarter sale of Karstadt Sport fetched the highest price for a property in the retail segment of the market. With shares of 7% and 4% of total trading volumes, hotels and logistics properties changed hands for 173m and 100m € respectively, Due to the ongoing high level of demand for core products let on long leases, premium returns are declining in all sectors. Year on year, premium returns for office properties declined from 4.7% to 4.5%, returns for retail property investments fell from 4.7% to 4.6% and for logistics properties from 7.2% to 6.9%.
International investors more active
In the first three quarters of 2014 the market for investments in commercial properties in Hamburg was marked by two trends: firstly, national actors dominated both the buying and selling sides of the market, and secondly, the activities of international companies also increased significantly on both sides of the equation. On the buying side their share rose from 30% to 46%, on the selling side from 20% to 41% of the volume of transactions. International actors came, first and foremost, from Canada, the USA and other European countries.
Open-end/specialist funds biggest buyers
By the end of the 3rd quarter of 2014 open-end and specialist funds had accounted for 750m € of investment activity, i.e. a third of the total. Project developers generated the second highest, albeit far lower, volume of transactions; their total of 235m € represented about 10% of the total. This sum included the purchase of the “Deutschlandhaus” (Dammtorstr. 1, City), bought by the project development company ABG Group from Credit Suisse for about 81m €.
Project and property developers most active sellers
By the end of the 3rd quarter project and property developers had sold commercial real estate in Hamburg for around 797m €, accounting for a 33% share of the transaction volume. With a share of some 31%, open-end and speciality funds, which were the biggest group of sellers in the same period a year ago, realized a total of some 749m €.
Outlook: new record level in sight
“In view of the busy market activity in the first nine months, the fourth quarter looks set to be very dynamic. Our forecast for the whole of 2014 is a total volume of commercial property transactions in excess of the 2.9bn € seen in the prior year. That would set a new record for the commercial properties market in Hamburg since the high of 2010,” says Christoph Ringleben.