Rising demand in Hamburg's investment market is meeting a limited supply of commercial properties, especially prime office and logistics properties. This is the reason transaction volume remains lower than it could be, reports real estate consultancy firm Cushman & Wakefield.
Transaction volume in Hamburg's investment market catches up
After a comparatively weak half-year transaction volume (EUR 1.16 billion), the commercial investment market in Hamburg showed much more activity in the third quarter. The transaction volume of around EUR 845 million brought the nine-month total to around EUR 2.01 billion. Nevertheless, this result is 45 percent last year's strong figure and 36 percent below the 5-year average for each of the first nine months. With 19 transactions and 27 percent of the transaction volume, most of this year's investment activity was concentrated in the eastern city locations, ahead of the city centre locations (16 percent).
Offices were once again the asset class with the highest volume. In total, around EUR 1.1 billion was invested in office properties and project developments in the first three quarters, which corresponds to a share of more than 55 per cent of the total volume. Compared to the same period last year, transaction volume has fallen by around 45 percent. The main reason for this is the continuing lack of available product in the core segment. The largest office transaction, the sale of medical centre Medienzentrum Rotherbaum in the Alsterlagen-West submarket in the third quarter for around EUR 170 million from the Jahr Group to Values Real Estate, was also the second-largest transaction of the current year.
Investor interest in logistics and industrial properties remains above average, accounting for almost 24 per cent of the commercial real estate transaction volume in Q1-Q3 at EUR 477 million. This was almost five times the previous year's figure and more than double the 5-year average for the first three quarters. The sale of the "Spectrum" logistics centre by Fiege Logistik to the DWS Group for around EUR 189 million in the second quarter contributed significantly to this unusually strong result.
The retail property transaction volume contributed only some EUR 88 million or 4 percent, of Q1-Q3 transaction volume, slumping by more than 80 percent in comparison to last year.
Marc Rohrer, Head of Capital Markets and Branch Manager of Cushman & Wakefield in Hamburg, explains: "Investors are predominantly focusing on core and core+ properties, which thus account for more than two-thirds of the transaction volume. At the beginning of the second half of the year, however, we saw that investors were increasingly reacting to the emerging recovery in the office market and were again more frequently considering value-add product. Their contribution to transaction volume rose again into the double-digit percentage range by the end of the third quarter. Nevertheless, core and core+ remain the first priority in terms of demand. However, there is still a lack of sufficiently large supply here. We therefore expect a moderate transaction volume result at the end of the year."
Excess demand for core properties continues to compress prime yields
The net initial yield for prime office properties in Hamburg's central locations has been stable at 2.80 per cent since the beginning of 2020, while in the non-central locations it is currently 3.90 per cent. In view of the consistently high demand for highly attractive core office properties with stable cash flows and tenants with strong credit ratings, yields are expected to fall slightly by the end of the year. The excess demand for logistics properties is similarly strong. The yield for high-quality logistics properties is quoted at 3.10 per cent at the end of September. A slight compression is expected to the end of the year. The prime yield for city centre commercial properties is currently at 3.75 per cent. No change is expected to the end of the year here.
