International real estate consultancy firm Cushman & Wakefield (C&W) has recorded transaction volume of EUR 215 million for the commercial real estate investment market in Frankfurt in the first quarter of 2024. Compared to the previous year, this was an increase of 30 percent. The result fell short of the 10-year average by 79 percent and the 5-year average by 81 percent.
Michael Fleck, Head of Capital Markets Frankfurt at C&W, explains: “The mood among market participants has brightened overall. Sellers and buyers are increasingly on the same page when it comes to prices. In addition, at least a slight upturn in transaction activity was observed. In short, investment deals are getting back on track. The Frankfurt market is still subdued early in the year, but an increase in transaction activity is expected in the second half of the year.”
Transaction volume: No transaction in excess of EUR 100 million
- In Q1 2024, no transaction of more than EUR 100 million took place. In the EUR 50 million to less than EUR 100 million category, two transactions contributed around 57 percent of the total transaction volume. Four deals contributing 27 percent of the total, were in the EUR 10 million to less than EUR 25 million category.
- At around 67 percent, the core-plus risk class predominated in the first quarter (Q1/2023: 11 percent). At just under 14 percent, opportunistic transactions accounted for the second-highest proportion of transaction volume.
- International investors contributed around 42 percent of total transaction volume in the first quarter (Q1/2023: 30 percent) with particular interested shown in portfolio deals, which accounted for more than a third of the transaction volume at around 36 percent.
Returns: Stabilisation of prime yields quarter-on-quarter
- From March 2023 to March 2024, the prime office yield for core properties in Frankfurt rose by 90 basis points to the current 4.70 percent.
- The prime yield for city-centre high-street mixed use buildings increased by 45 basis points year-on-year to 4.55 percent. For logistics properties, the prime yield is currently 4.50 percent, 35 basis points more than a year previously.
- On a quarter-on-quarter basis, prime yields across all asset classes remained stable for the first time in two years.
- As the year progresses, C&W expects yields to remain static. A stabilisation of yields and the ECB’s key interest rate since September 2023 is likely to lead to greater certainty in price discovery processes and investment activity is likely to regain momentum.
Types of use: Office and logistics properties on a par
- After the complete absence of office transactions in the previous quarter, sales of office properties again contributed EUR 75 million and 35 percent of total CRE transaction volume for Q1 2024. In a year-on-year comparison, this proportion has fallen by 10 percentage points. The acquisition of LEIQ (component A) in Offenbach-Kaiserlei from HT Group by open-ended special fund HT Top 8 Invest contributed to this result.
- The continuing investor interest in industrial and logistics real estate is reflected in transaction volume. The industrial and logistics sector, like the office segment, contributed around 35 percent of CRE transaction volume in the Frankfurt market at EUR 75 million. This includes, among other things, the purchase of a logistics property in Egelsbach by Frasers Property for around EUR 57 million as part of a portfolio deal.
- Mixed-use properties and land accounted for a total of 26 percent or EUR 55 million of transaction volume in the 1st quarter. The sale of a plot of land in Frankfurt-Unterliederbach by the semi-municipal development company KEG to the City of Frankfurt for EUR 10.4 million with the aim of building a solar park contributed to this result.
- Hotel properties contributed around EUR 10 million or around five percent of CRE transaction volume. This includes the sale of the B&B Hotel at Wilhelm-Fay-Straße 53 in Frankfurt to Imaxxam Asset Management. No transaction involving retail properties were recorded in the quarter under review.
