For the 1st quarter of 2022, the international real estate consultancy firm Cushman & Wakefield (C&W) registered commercial real estate transactions in Berlin with a volume of EUR 1.85 billion. This was 69 percent higher than a year ago but 5 percent below the Q1 five-year average.
Office property transactions above last year's level
The majority of capital invested in real estate in the first quarter flowed into office properties amounting to some 65 percent or EUR 1.2 billion. This was 224 percent more than in the weak 1st quarter of 2021, but in line with the Q1 five-year average. Office transactions included twelve properties which were part of Brookfield's acquisition of Alstria. Mixed-use properties, including Quartier 207, were also significant, with a transaction volume of EUR 340m.
Due to lack of availability, the transaction volume for logistics properties was only EUR 70 million, 23 percent below last year's level. Only 3 percent of transaction volume was attributed to retail properties at EUR 60 million, corresponding to a fall of 63 percent. Hotel transactions contributed a volume of EUR 120 million.
Demand from abroad for commercial real estate in Berlin was high. The proportion of foreign capital was 66 percent.
Clemens von Arnim, Head of Capital Markets Berlin, on further developments: "The deal pipeline speaks for a strong investment transaction year in 2022. Already at the beginning of the second quarter, more than EUR 4 billion of further assets are being marketed or their marketing is in preparation. Although market conditions are currently changing due to rising financing rates and the cooling economy, Berlin is a resilient market. We continue to register high levels of investor interest from around the world in all risk classes."
Slight increase in prime office yields expected by the end of the year
The prime yield for Berlin office properties in Q1 2022 is 2.60 percent, down 15 basis points year-on-year. However, it has remained static since Q2 2021. In view of the significant increases in yields on government bonds and financing interest rates, the downward trend in office yields has halted for the time being. C&W expects yields to rise slightly by the end of the year with the probability and extent of the increase higher for properties in poorer condition.
Logistics and light industrial properties are currently trading at a prime yield of 3.00 percent. This is 30 basis points less than a year ago. Despite the general interest rate development, it is assumed that further slight yield compression can be expected by the end of 2022 due to the tight supply and the strong trend in favour of this type of use.
The prime yield for city centre commercial properties fell by 30 basis points year-on-year to 3.30 percent, after the pandemic initially caused yields to move out by 50 basis points in 2020.