4.38 billion euros of commercial real estate investment transactions took place in Berlin in the first half of the year. This represents an increase of 7% compared to the same period last year. The majority of this, at around €3.29bn, is attributable to the second quarter.
High-priced individual sales drive up turnover
Mixed-use properties, including the Fürst, the Gloria Galerie and the Quartier 206, dominated market activity. Around 1.95 billion euros or 44% of total volume was attributable to these properties. Office properties followed in second place with €1.22 billion or 28% of volume, including the transactions of Weidt Park Corner and Park Kolonnaden. Transactions involving retail properties, for example the Zehlendorfer Welle, totalled 268 million euros, which corresponds to 6 % of the total. Logistics and industrial properties contributed 3 % (132 million euros). 616 million euros were invested in other properties, including many commercial properties, which corresponds to 14 % of the total turnover.
The largest transaction of the first half was the sale of the Fürst for over 1 billion euros. Aggregate Holdings acquired the mixed-use redevelopment project, of the former Kudamm-Karree, from Vivion. In addition, eleven further transactions with a purchase price of at least 100 million euros were registered. One of the most significant of these was a partial sale of the "Gloria Galerie", which was sold by Centrum at a price of over 25,000 euros per square metre.
Secure cash flows highly sought after
The distribution of the investment volume among the risk classes underlines the currently prevailing preference for secure cash flows. 69% of the invested capital is accounted for by properties in the Core and Core+ classes. At 65%, the share of international capital was 4 percentage points higher than a year ago. The last time an even higher value was achieved in the first half of a year was in 2017.
Portfolio deals played only a subordinate role with a 5 % share of transaction volume. Differentiating by buyer type, investment and asset managers were responsible for slightly more than half of the investment volume. Insurance companies, pension funds and property developers shared second place with 12 % each.
Clemens von Arnim, Head of Capital Markets Berlin at Cushman & Wakefield, explains: "After the cautious start to the year, which was still strongly influenced by the lockdown measures, the market has developed positively. Market players have re-intensified their marketing activities as vaccination progresses faster. Despite new uncertainties regarding the delta variant, we expect to see a solid investment volume in the second half of the year. Especially in office properties, there are still some major deals to come, so an investment volume of around €7.5 billion is realistic by the end of the year."
Yield compression for office properties in the core segment
The prime yield for Berlin office properties is currently 2.60%, 30 basis points below the level of a year ago. Since the beginning of the pandemic, the attractiveness of properties with secure cash flows, long lease terms and tenants with strong credit ratings has increased. The Berlin office market is particularly attractive in this regard due to the high proportion of public sector tenants. Cushman & Wakefield expects a further slight compression of prime yields by the end of the year.
Rising prices in the logistics segment
Prime logistics and light industrial properties are currently trading at a prime yield of 3.30% in the Berlin region. At the end of June 2020, the value was still 3.90 %. The accelerated trend towards online trading during the pandemic has contributed strongly to this. Cushman & Wakefield expects further slight yield compression by the end of the year.
Prime retail rents stable
Berlin's prime yield for commercial properties in prime locations is quoted at 3.50% at the end of the second quarter of 2021, unchanged from a year ago. Due to the increasing loosening of restrictions on the retail sector, an increase in demand and yield compression cannot be ruled out.
