Office transactions generate the highest transaction volume
In the first nine months of the year, office properties accounted for a total transaction volume of around EUR 190 million, i.e. almost 32 percent of the total CRE transaction volume of EUR 585 million in Düsseldorf. In the same period last year, commercial real estate with a total value of EUR 1.9 billion was traded.
Core office transactions have so far proven completely absent and this continues to be the risk class most affected by the interest rate turnaround. On the buyer side, institutional investors continued to take a wait-and-see approach, with the result that most office acquisitions were made by family offices and project developers.
Mirko Kittler, Partner Capital Markets Düsseldorf at Cushman & Wakefield, explains: “The general conditions in the financial markets continue to be very challenging for institutional investors, so we do not expect a traditional year-end rally this year. The core office investment market has been virtually non-existent in the year-to-date. We only expect a slight recovery here next year, when the risk premium for core office properties increases more strongly again.”
The sale of one of the two office developments projects in the “maxfrei” quarter in the 1st quarter of 2023 is the largest transaction so far in the current year. Barmenia Krankenversicherung acquired the development in the Kennedydamm submarket from Interboden and Hamburg Team in a forward deal.
The transaction volume for retail real estate more than doubled compared to a year previously (+155 percent) and totalled EUR 115 million in the first three quarters. Commerz Real's 20 percent stake acquisition in ten SIGNA department stores nationwide made a significant contribution to the strong transaction volume. In Düsseldorf, this involved two properties: Am Wehrhahn 1 and Königsallee 1–9 in prime high-street locations.
Logistics and industrial properties asserted themselves as the second-strongest asset class, contributing a good 29 percent, or EUR 170 million, to total CRE transaction volume in the year to date. Including the municipalities surrounding Düsseldorf, there was an increase in of almost 17 percent compared to the previous year. This was driven by the sale of the 23-hectare “Areal Böhler” in Meerbusch by the Voestalpine Group to the American company Jamestown for EUR 160 million.
Further increase in prime office yields very likely
The prime yields for office, retail and logistics use have been moving steadily upwards since the turnaround in interest rates. The prime yield for core office properties stood at 4.75 percent at the end of the 3rd quarter, marking the highest level for ten years. Compared to the previous quarter, this represents an increase of 50 basis points, and compared to a year ago,150 basis points.
The prime yield for high-street commercial buildings in 1a locations is currently 3.70 percent, which is 60 basis points higher than at the same point last year. The prime yield for core logistics properties is 4.30 percent and has risen by 70 basis points over the past twelve months.
Both the ECB's recent raising of interest rates and the current high level of yields on the bond market make it clear that the increase in real estate yields has not yet peaked. For the final quarter, C&W expects further increases in yields.
