According to figures from international real estate consultancy firm Cushman & Wakefield (C&W), Munich’s commercial real estate transaction volume reached just over EUR 1.0 billion in the first three quarters of 2023, of which around EUR 340 million was added in the third quarter. Compared to the first three quarters of the previous year, this corresponds to a decline of 65 percent.
More office transactions than in the previous quarter
In the course of 2023 so far, including the 3rd quarter, the office segment accounted for around 50 percent of the commercial transaction volume (EUR 520 million), which corresponds to a decrease of 74 percent compared to the same period last year (EUR 2 billion). In Q3 2023, the office transaction volume increased significantly, to around EUR 255 million (75 percent of the total CRE total) compared to EUR 80 million in Q2. So far this year, twelve Munich office properties have changed hands, seven of these in the 3rd quarter.
Investor focus core-plus properties
Among the seven office transactions in Q3, four were in the core-plus segment, including the sale of a property in the south of Munich for over EUR 90 million to an investment company (the second most expensive office deal so far this year) and the sale of the "Laim290" property to VALUES. Real Estate for 50 million euros. Two further core-plus transactions totalled around EUR 58 million.
"Other" asset class achieves second-strongest transaction volume
In the first three quarters of 2023, transactions in the "Other" asset class generated a transaction volume of around EUR 355 million. This was achieved via the sale of six plots of land and five mixed-use buildings. The sale of land on Seidlstrasse in the 1st quarter of 2023 for EUR 250 million remains the largest transaction so far this year.
In the first nine months of the year, the retail and industrial/logistics asset classes recorded transaction volumes of EUR 55 million and EUR 70 million respectively. This is a decrease of 69 percent (retail) and 80 percent (industry/logistics) respectively compared to the equivalent period in 2022. Transaction volume in the hotel segment in the first three quarters amounted to EUR 30 million, compared to EUR 90 million in the same period last year.
Jan Isaakson, Head of Capital Markets Munich at C&W, explains: “Although the transactions of the last few months are positive, it is assumed that the pricing phase will continue until 2024. Equity investors often still see bonds as an attractive alternative for the core and core-plus segments. At current yield levels, this leads to low availability of deployable capital. Any significant increase in transactions by the end of the year is unlikely.”
Prime office yields continue to rise
At the end of Q3 2023, the prime yield for high-quality modern core office properties in Munich was 4.20 percent, 120 basis points above the level of a year previously.
For 1A retail properties, the prime yield at the end of Q3 2023 is 3.80 percent, 70 basis points above the value seen at the same point in 2022. Logistics properties are trading at a prime yield of 4.30 percent at the end of Q3 2023, which corresponds to the level of Q3 2022.
