The transaction volume in Munich’s commercial real estate market was around EUR 2.91 billion in the first three quarters of 2022 according to international real estate consultancy firm Cushman & Wakefield. Compared with the previous year’s equivalent figure, this represents a decline of just under 25 percent.
Last year, several individual sales of over EUR 500 million each contributed to an above-average transaction volume. The transaction volume in Q3 2022 was significantly more dynamic than in the first two quarters and, at around EUR 1.45 billion, achieved the highest quarterly turnover of the year to date.
Several large-volume office sales in Q3
Office properties are the main driver of Munich's transaction volume and are one of the most popular asset classes among investors. From January to September, their transaction volume totalled around EUR 2.06 billion. This corresponds to around 71 percent of the total CRE transaction volume. In the third quarter, four office buildings with purchase prices of over EUR 100 million each changed hands, including the Wacker-Chemie headquarters and the H2O building. The largest office transaction in the course of the year thus far was the sale of the Olympia Business Center for around EUR 300 million in Q1.
Sales involving logistics and industrial properties have established themselves as the second-strongest asset class. With a total of EUR 350 million, the sales volume more than tripled year-on-year, contributing 12 percent of the total.
After acquisitions and sales of retail properties were notable by their scarcity last year, this year's contribution thus far is around 6 percent.
Jan Isaakson, Head of Capital Markets Munich at Cushman & Wakefield, summarizes: "The difficult and persistently high interest rate environment is making investors very hesitant. We are observing restraint and price reductions above all for office properties in the core segment. Value-add and opportunistic properties are currently the most liquid on the market. The Munich office letting market is in very good shape, so there is good re-letting potential for possible manage-to-core strategies. Equity-strong investors will thus become more attractive as buyers."
Further increase in prime yields expected
The prime yield for high-quality core office properties in Munich at the end of Q3 2022 is 3.00 percent, 25 basis points above the level of the previous quarter and 50 basis points above the level of a year ago. High borrowing interest rates continue to complicate the pricing process between buyers and sellers. In view of persistently high inflation and an expected further increase in the European Central Bank's (ECB) main refinancing rate, C&W expects yields to continue to rise slightly.
Logistics and light industrial properties are currently trading at a prime yield of 3.60 percent. The prime yield for city centre commercial properties is quoted at 3.10 percent at the end of the 3rd quarter.