According to research by international real estate consultancy firm Cushman & Wakefield (C&W), purchases and sales of commercial real estate and development properties in Germany totalled around 22.1 billion euros in the first half of 2021. This fell short of the previous year's result of 28.8 billion euros by 23 % and of the average H1 result of the previous five years by 9 %, but is 13 % above the ten-year average.
Large deals as a driver in the second quarter
After the transaction volume of 9.54 billion euros in the first quarter failed to breach the 10 billion euro threshold, a 30 % higher result of 12.5 billion euros was recorded for the second quarter. Decisive it this were more, and particularly some very large, transactions in the three-digit-million-euro range. In five deals transaction volume exceeded 600 million euros, alone contributing around 4 billion euros; one third of the quarterly result and almost 20 % of the half-year result. The largest transaction was the sale of the Fürst development project in Berlin for more than one billion euros to Aggregate Holdings, followed by the acquisition of 69 properties from the portfolio of the Israeli investor Summit by a Tristan fund. Munich was the target market for the remaining three of the five largest deals. Here, the city's two tallest office towers, the Highlight Towers and the O2 Tower, changed hands.
Office properties remain in focus
Despite ongoing discussions about the effects of remote working on the office market, office properties continue to be the most popular with investors, with a transaction volume of 9.4 billion euros. Prospective buyers are particularly focused on properties occupied by crisis-proof tenants with long-term leases. The contribution of office deals to total real estate transaction volume has been 43% so far this year. The second-strongest sector is industrial properties, which are benefiting from booming online trade, among other things. Transactions involving warehouses, light industrial properties and distribution centres amounted to around 3.5 billion euros. Their contribution to total volume is 16 %, that of retail properties is 10 % and that of hotels only 4 %.
International capital accounted for 38% of the transaction volume in the first half of the year and was thus somewhat less strongly represented than in previous years (H1 2020: 42%). In particular, non-European investors without a European base were restricted in their activities by the travel restrictions of the past two quarters.
Berlin and Munich attract the most capital
The top-7 markets increased their transaction volume from 3.7 billion euros in the first quarter to 8.5 billion euros in the second quarter, not least due to large-volume transactions. They thus contributed 12.2 billion euros and 55 % of the German H1 total. Berlin leads the ranking unchallenged (4.4 billion euros), followed by Munich (3 billion euros), Frankfurt (1.6 billion euros), Hamburg (1.2 billion euros), Düsseldorf (890 million euros), Cologne (750 million euros) and Stuttgart (405 million euros). Among the top-7 markets only Berlin, Munich and Cologne achieved higher results than in the same period last year.
Even stronger upturn in the second half of the year
Alexander Kropf, Head of Capital Markets at Cushman & Wakefield in Germany, comments: "We expect that the willingness to close deals in the investment market will continue to pick up in the coming months. A number of properties, including large assets, are already at an advanced stage of negotiation, investors who are currently still hesitant will abandon their reluctance, and some investors are likely to take more risks again and thus consider a broader investment spectrum. At the same time, the fierce competition for core properties with secure cash flows over many years will continue unabated. We therefore reaffirm our spring forecast that transaction volume will rise to well over 50 billion euros by the end of the year."
Prime yields remain low
The median value of prime yields in the top-7 cities is currently 2.84%, 11 basis points lower than in mid-2020. Munich is the most expensive market (2.50%), Cologne (3.10%) and Stuttgart (3.20%) are the comparatively cheapest markets. For logistics properties, mean prime yields have fallen by 60 basis points in the last 12 months to the current 3.31%. With the exception of Stuttgart (3.40%), 3.30% applies to all top locations. The median value of prime yields for first-class commercial properties is currently 3.68% and thus at a similar level to that of mid-2020 (3.70%), with values ranging from 3.20 % in Munich to 3.85 % in Düsseldorf, Cologne and Stuttgart. As demand for prime product is consistently exceeds supply, yields will at least maintain their low level in the coming months, and may even compress further in some areas.