For the full year 2021, international real estate consultancy firm Cushman & Wakefield (C&W) registered commercial real estate transactions in Berlin with a volume of EUR 11.3 billion. The figure was 29 percent higher than in 2020 and 41 percent above the five-year average. The record result of 2019 was missed by only four percent. At EUR 4.6 billion, the final quarter was particularly strong in terms of sales. 14 of 33 transactions with a purchase price of EUR 100 million or more took place during this period.
Logistics properties and development sites particularly sought after
43 percent of the capital invested in commercial real estate in 2021 or around EUR 4.8 billion, flowed into classic office properties. This was 13 percent less than in the previous year. This is partly due to C&W having assigned large properties with a high proportion of office space to the "Mixed-use” real estate" category, where a transaction volume of around EUR 2.2 billion was registered. This corresponds to 19 percent of the total volume. The largest single transaction was the sale of the "Fürst" for a price of more than EUR 1 billion.
Logistics properties achieved an unprecedented transaction volume of EUR 880 million and a market share of 8 percent. Compared to the already strong previous year, this corresponds to an increase of 60 percent.
Retail real estate accounted for only 5 percent of the recorded volume. The EUR 550 million corresponds to a fall of 52 percent compared to 2020.
The number of transactions of plots of commercial land was strikingly large. Around EUR 1.8 billion was generated in this area, reflecting the lively activity of the property developers in Berlin.
Increases in net present value drive higher transaction volumes
The transaction volume growth trend in Berlin is mainly due to increased capital value growth, which has been particularly pronounced since the end of 2015 with capital values for prime office properties having risen by 168 percent since then. Clemens von Arnim, Head of Capital Markets Berlin at C&W, explains: "A significant example is the building of the Berlin headquarters of the Federal Ministry of Health. Momeni bought it in 2015 for around EUR 4,000/sq m and was able to resell it in 2021 for around EUR 18,000/sq m without extensive renovations or extensions to the property, an increase of 350 percent."
The capital values of prime logistics properties have also increased significantly since 2015, with growth of 141 percent. In retail, the picture is more differentiated, with comparatively moderate capital value growth of 66 percent and 49 percent for retail parks and supermarkets, stability for prime high street properties and decreases of 28 percent for shopping centres.
"In this context, the growth in the commercial transaction volume of 41 percent in the same period seems almost moderate and illustrates that there are still opportunities for further transaction volume growth," Clemens von Arnim continues.
Prime yield compression in all asset classes
The prime yield for Berlin office properties at the end of 2021 was 2.60 percent, 15 basis points below the previous year's figure. Yield compression was even more pronounced for properties of average fit-out quality in top locations, at 40 basis points. C&W expects prime yields to remain stable in the new year.
High-quality logistics and light industrial properties are currently traded at a prime yield of 3.00 percent, which is 40 basis points less than a year earlier. By the end of 2022, a further slight yield compression is to be expected.
The prime yield for centrally-located commercial buildings compressed by 10 basis points to 3.35 percent during Q4, 15 basis points below the crisis-related high of a year earlier. In 2022, further slight yield compression is likely.