In the 1st quarter of 2024, international real estate consultancy firm Cushman & Wakefield (C&W) registered a transaction volume of around EUR 390 million in Hamburg’s commercial real estate market. This is the fifth consecutive quarter in which the result remains below the EUR 500 million mark. After the even weaker result of a year ago, this is the second-weakest first quarter of the past ten years.
Niklas Hensiek, Associate Capital Markets Investment Sales at C&W, explains: “A weak start to investment year 2024 was expected due to unchanged discordant situation. We have seen more transactions than in the equivalent period last year, which is a hopeful sign. However, some sellers have fallen well short of their purchase price expectations. Accordingly, the price discovery phase is still ongoing, although the bottoming out is imminent.”
Transaction volume: Well below long-term average
- Although the total transaction volume of EUR 390 million is 81 percent higher than the extremely weak prior-year quarter, it remains 56 percent below the Q1 5-year average of EUR 884 million.
- Transactions of over EUR 100 million failed to materialise in the 1st quarter. 87 percent of the transaction volume was accounted for by deals with a volume of less than EUR 50 million, with a clear focus on core-plus properties.
- Contribution 44 percent of the total transaction volume, international investors were similarly active as a year ago (43 percent) and the 5-year average (48 percent).
Yields: Moving sideways compared to the previous quarter – peak appears to have been reached
- The net initial yield for prime office properties in Hamburg’s central locations was 4.75 percent at the end of Q1 2024. It has thus remained static compared to the previous quarter but is 95 basis points higher than 12 months previously.
- The prime yield for high-street commercial buildings in 1a locations remains stable at 4.65 percent compared to the previous quarter. The year-on-year increase is 55 basis points.
- For first-class logistics properties, the prime yield is also stable at 4.50 percent compared to the previous quarter – 35 basis points more than a year ago.
- Prime yields remain at the high level of the end of 2023, having previously increased for seven consecutive quarters since Q2 2022. C&W expects this to be the peak of the rise in yields. Expected interest rate cuts from mid-year create potential for subsequent falls in prime yields.
Property use type: Logistics and industrial properties overtake office real estate in terms of transaction volume
- Sales of logistics and industrial properties generated a transaction volume of around EUR 150 million in the first quarter and, contributing 38 percent of the total CRE transaction volume, were the strongest asset class. The previous year’s figure (EUR 95 million) and the Q1 5-year average were exceeded by 58 percent and 84 percent respectively.
- The largest single transaction in Hamburg’s real estate investment market was the sale of a logistics centre on Vollhöfener Weiden from a fund managed by Tristan Capital Partners to Montea (around EUR 50 million).
- Office properties were the second-strongest sector in the first quarter with a transaction volume of around EUR 115 million and a contribution of 29 percent. Although this is 92 percent higher than in the extremely weak prior-year quarter (EUR 60 million), it is still 79 percent below the Q1 5-year average of EUR 549 million.
- There were no sales of office properties with a volume exceeding EUR 50 million. One of the largest was the sale of the office and commercial building at Dornbusch 2 and 4 in the City Centre submarket by French investor Ofi to investment manager Montano Real Estate for around EUR 37 million.
- The transaction volume in the Retail real estate segment amounted to around EUR 35 million in the 1st quarter, which corresponds to a 9 percent of the CRE total. This is 17 percent more than in the equivalent period last year.
