The commercial real estate investment market in Düsseldorf and the extended logistics market area reached a total transaction volume of EUR 2.83 billion in the first three quarters of 2022, reports international real estate consultancy firm Cushman & Wakefield. This means that the transaction volume has more than doubled compared to the same period last year (+126 percent). Compared to the 5-year average of the first three quarters, the increase in is around 37 percent.
After the sharp rise in borrowing costs significantly affected transaction volume in the second quarter, numerous individual-property sales took place in July to September, some at high sales prices. Two major transactions with purchase prices of over EUR 200 million each were the main reason for the positive quarterly transaction volume of around EUR 1.02 billion.
Office properties account for 67 percent of transaction volume
In the course of the year so far, sales of office properties have contributed the lion’s share of total transaction volume, some EUR 1.89 billion (67 percent share of the total). Here, too, the transaction volume has more than doubled compared to the previous year (+118 percent).
In the Düsseldorf logistics market area, which also includes the surrounding municipalities, sales involving logistics and industrial properties totalled around EUR 145 million. Their contribution to total CRE transaction volume in the first three quarters was around 5 percent.
Development sites were also in demand. Two large-volume sales brought the total transaction volume here to around EUR 560 million. Nevertheless, it is becoming increasingly difficult for property developers to realize their price expectations in the current environment.
After only a few sales and weak transaction volumes in the retail property sector recently, confidence in this sector appears to be gradually returning among individual investors. However, they are still acting selectively, with a focus on high-street properties and possible manage-to-core strategies. This asset class accounts for around 2 percent of total transaction volume so far this year.
Angelo Augenbroe, Head of Capital Markets in Düsseldorf at Cushman & Wakefield, explains: "The high borrowing costs and the higher equity backing now required by banks are complicating the pricing processes between buyers and sellers. In addition, forward deals are becoming increasingly unattractive due to declining pre-letting rates. In the office segment, transaction activity will therefore probably focus on existing buildings for some time. For 2022 as a whole, we expect transaction volume to fall below EUR 3.5 billion mark, which is still a solid annual result for the Düsseldorf investment market."
Prime yields will continue to rise
The prime yield for high-quality and modern core office properties has risen by 10 basis points compared to Q2, to 3.25 percent and thus by a total of 35 basis points over the last six months. Compared to 12 months ago, the increase corresponds to 45 basis points.
The extent of the next interest rate increase by the European Central Bank (ECB) at its council meeting at the end of October 2022 is also awaited with great anticipation.
Prime office yields are expected to continue to rise. The prime yield for 1-A retail properties is currently 3.10 percent. The prime yield for first-class logistics properties is 3.60 percent.