According to figures from international real estate consultancy firm Cushman & Wakefield (C&W), Munich’s commercial real estate transaction volume amounted to around EUR 150 million in Q4 of 2023. This brings the total for 2023 as a whole to around EUR 1.18 billion. This corresponds to a decline of 68 percent compared to the previous year’s result.
Jan Isaakson, Head of Capital Markets Munich at C&W, said: “The investment market ended 2023 with a historically low transaction volume, 80 percent below the 10-year average. In the course of 2023, many transactions could not be successfully completed due to lack of liquidity or disagreement regarding pricing. But a look at the 10-year swap rate, which fell by almost 100 basis points in Q4, gives the impression that 2024 could see more favourable winds and go down in the books as the turnaround year.”
Transaction volume: Lack of year-end rally leads to historically weak 4th quarter
- In 2023, Munich’s investment market saw its weakest annual result since 2004 at around EUR 1.18 billion. Even in the crisis years of 2007/2008 and the Covid pandemic, higher results were achieved.
- Q4 2023 also saw a historically weak result with a transaction volume of around EUR 150 million. By comparison, the Q4 10-year average is around EUR 2.33 billion. Compared to the Q4 2022 result (around EUR 810 million), a decline of 81 percent was recorded. The generally cautious market sentiment of the foregoing quarters continued in Q4, and accordingly there was no year-end rally.
Yields: Prime yields continue to rise across all asset classes
- The prime yield for core office properties at the end of Q4 was 4.60 percent, 40 basis points above the level of the previous quarter (+130 basis points compared to Q4 2022).
- For centrally-located commercial buildings, the prime yield increased by 30 basis points to 4.10 percent at the end of Q4 (+90 basis points compared to Q4 2022).
- For logistics properties, the prime yield is currently 4.50 percent, 20 basis points above the previous quarter's figure. Year-on-year, this represents an increase of 50 basis points.
- For 2024, Cushman & Wakefield expects a plateauing of prime yields in the aforementioned asset classes.
Property type: No transactions in the office or retail segments in Q4
- Due to the complete absence of office transactions in Q4, the figure of EUR 520 million achieved by the end of the 3rd quarter remains unchanged. Compared to the approximately EUR 2.3 billion achieved in the office segment in 2022, this represents a decline of 78 percent, and the result is also 82 percent below the 5-year average.
- However, the full-year analysis shows that office transactions still accounted for the largest proportion of the transaction volume at 44 percent (particularly via seven office transactions in the 3rd quarter). At EUR 100 million, the largest transaction of the year (Q1) was the sale of an office property in the Neuhausen-Nymphenburg district to an insurance company.
- No transactions were also registered in the retail segment in Q4, bringing the transaction volume to EUR 55 million at the end of the year. This figure is 79 percent below the previous year’s result.
- At EUR 80 million, logistics properties accounted for the majority (53 percent) of the transaction volume in the quarter under review, up 45 percent compared to Q4 2022. This total results from the sale of a portfolio consisting of two properties (both distribution halls) in the municipality of Neufahrn. The seller is the Branicks Group, the buyer is a sovereign wealth fund from Singapore and an investment company from the UK. Overall, revenue of EUR 150 million was achieved in the logistics segment in 2023 (-63 percent compared to 2022).
- In Q4, a hotel property changed hands for EUR 10 million. For the year as a whole, sales amounted to EUR 40 million (-78 percent compared to 2022).
- The “Other” sector made the second-highest contribution to transaction volume in both Q4 (EUR 60 million; 40 percent) and the year as a whole (EUR 415 million; 35 percent). With a purchase price of EUR 250 million, the sale of the Seidlstrasse 15-19 property by the Free State of Bavaria to Apple in Q1 2023 is largely responsible for the annual result. Compared to 2022, sales in the “Other” sector recorded a decrease of 22 percent.
