International real estate consultancy firm Cushman & Wakefield (C&W) recorded a slightly weaker result in the Berlin’s commercial real estate market in the first quarter of 2024 than in the previous quarter (EUR 580 million) with transaction volume of EUR 525 million. This is 74 percent below the Q1 5-year average and thus remains at a low level.
Clemens von Arnim, Head of Capital Markets Berlin at C&W, summarises: “There is still little transaction activity on the Berlin investment market. Office properties are the hardest hit, and of the transactions which take place, almost all are directly or indirectly related to insolvencies. At the moment, it is mainly bargain hunters who are active, relying on the fact that owners have to sell and therefore offer correspondingly low prices. In this environment, hardly any owners are voluntarily selling their property.”
Transaction volume: Weakest quarter for 13 years
- At EUR 525 million, the transaction volume is 9 percent below the previous quarter's figure and 55 percent below that of Q1 2023. The commercial real estate transaction volume thus fell to its lowest level since 2011.
- Half of the transaction volume was contributed by four transactions. The largest was the sale of Hotel de Rome for around 145 million euros by the Singaporean sovereign wealth fund to the Italian Gruppo Statuto.
- The contribution of international capital to toal transaction volume was 42 percent, which is on a par with the 5-year average (41 percent).
Yields: Prime yields remain at a high level
- The prime yield for office properties has remained unchanged at 4.60 percent since the final quarter of 2023 (+80 basis points compared to Q1/2023). Within only two years, the cumulative increase amounts to 200 basis points, following the rapid rise in bond yields.
- The prime yield for city centre high-street commercial buildings also remained constant at 4.35 percent (+55 basis points compared to Q1/2023).
- For logistics properties, the prime yield is currently 4.50 percent, unchanged from the previous quarter and 35 basis points above the level of Q1 2023.
Property use types: Weak quarter for office and retail properties
- The office real estate transaction volume amounted to EUR 145 million in the first quarter. This represents a decrease of 9 percent compared to Q1 2023 and is 87 percent below the Q1 5-year average.
- Hotel properties also contributed EUR 145 million, but this was via only a single transaction. Land contributed EUR 97 million, and mixed-use properties EUR 40 million.
- At EUR 20 million, C&W recorded a decline of 88 percent in retail real estate transaction volume compared to the previous quarter. Only two quarters have been weaker in the past ten years (Q3/2022 and Q2/2021).
- In Q1, C&W recorded logistics and industrial real estate transaction volume of EUR 75 million, an increase of 25 percent compared to Q1 2023. This is due in large part to Shurgard's acquisition of Pickens Self-Storage. Nevertheless, this property segment still fell 22 percent short of the Q1 5-year average.
