At around EUR 490 million, the 4th quarter of 2023 was the strongest in terms of transaction volume in Hamburg's commercial real estate market. For the year as a whole, we recorded an investment volume of around EUR 1.21 billion. The last time a lower annual result was recorded was in 2004.
Niklas Hensiek, Associate Capital Markets Investment Sales, explains: “As expected, the investment year 2023 was also subdued in Hamburg and there was no year-end rally. Due to the uncertain macroeconomic environment, the year was dominated by price discovery. As a result, little product came onto the market and the willingness of institutional investors to buy was severely reduced. The prospect of interest rate cuts and more stable financing conditions, as well as the expected stabilisation of yields over the course of 2024, point to increased investment activity that could mark the beginning of a market recovery.”
Transaction volume: well below the long-term average
- The total transaction volume of EUR 1.21 billion is 71 percent below the previous year‘s figure of EUR 4.10 billion and 73 percent below the 5-year average of around EUR 4.53 billion.
- Most of the sales were for properties below EUR 50 million, with a clear focus on core-plus properties. Institutional investors continued to be very cautious about core office properties due to the uncertain macroeconomic environment.
- With 18 percent of the total transaction volume, international investors were more cautious than in the previous year (60 percent) and the 5-year average (38 percent).
Yields: rise continues
- The net initial yield for prime office properties in Hamburg's central locations stood at 4.75 percent at the end of Q4 2023. This is 140 basis points more than a year ago.
- The prime yield for high street commercial buildings in 1a locations is currently 4.65 percent. The year-on-year increase is 90 basis points.
- For prime logistics properties, the prime yield stands at 4.50 percent, which represents an increase of 50 basis points compared to Q4 2022.
- Since the tenth increase by the ECB in September 2023, the key interest rate has remained stable at 4.50 percent. Experience has shown that prime yields in real estate react to changes in key interest rates with a time lag, so that a further, slight increase in yields is possible at the beginning of 2024. Expected interest rate cuts in the middle of the year provide potential for subsequent declines in prime yields.
Property types: Office property segment dominates thanks to urban owner-occupancy
- Office properties were the asset class which contributed the highest transaction volume in 2023, despite this being a low EUR 690 million. They still accounted for 57 percent of the total transaction volume. The result was 73 percent below the previous year's figure of EUR 2.51 billion and 74 percent below the 5-year average of EUR 2.70 billion. The last time the result was even lower was during the financial market crisis in 2009 (EUR 580 million).
- Almost half of the transaction volume was accounted for by purchases for owner-occupancy. This includes the two largest office transactions, which are also the only individual transactions in the Hamburg real estate investment market with a volume of EUR 100 million or more. One of these was the purchase of the Am Strandkai 1 building by the Hamburg Port Authority in Q4 for EUR 157 million from DWS. The other was the sale by PPS Immobilien Holding of the Fritz Schumacher Building on Gänsemarkt in the city centre submarket to the City of Hamburg for EUR 119 million in Q2.
- Logistics and industrial properties generated a transaction volume of around EUR 210 million and, accounting for 17 percent of the total transaction volume, was the second-strongest asset class. This result was still 38 percent below the previous year’s figure of EUR 340 million.
- In Q4, the only transaction was the acquisition by Kaldox of six logistics halls in Billbrook. The largest individual transaction remains the sale of Panattoni Park Hamburg Nord to J.P. Morgan Asset Management and Cromwell Property Group in the first quarter (over EUR 90 million).
- There were no retail real estate transactions in Q4. The transaction volume for 2023 thus amounted to around EUR 80 million, which corresponds to 7 percent of the CRE total. The decrease compared to the equivalent period the previous year is 83 percent.
- Only hotel sales recorded an increase in transaction volume, by 13 percent compared to the previous year's result, to EUR 90 million (2022: EUR 80 million).
