Cushman & Wakefield, one of the world’s largest real estate consultancies, has recorded a transaction volume of EUR 2.34 billion for the office investment market in Germany in the first half of 2024. Compared to the first half of 2023, turnover is therefore almost unchanged. Nevertheless, the result represents the lowest half-year volume in the past ten years.
Helge Zahrnt, Head of Research & Insight Germany at Cushman & Wakefield, explains: “The weak economy, major uncertainties regarding the future space requirements of many companies and the still high level of interest rates as well as the tense financing situation continue to weigh heavily on the office investment market.”
Transaction volume: no large-volume individual transactions
- While there were still several individual transactions in office properties above the EUR 100 million mark in the previous year, there were only two portfolio transactions of this size in the first half of 2024: the sale of S-Immo AG’s portfolio of 19 office properties to the Livos Group for EUR 255 million in the second quarter and three office properties from Branicks to VIB Vermögen.
- Office properties accounted for around 21 per cent of the overall German investment market in the first half of the year. This figure was around 5 percentage points below that of the previous year and 37 percentage points below the peak from the first half of 2007 (58 per cent).
- With 94 registered sales, transaction activity has picked up slightly compared to the same period last year (81 transactions), but is still significantly lower than before the interest rate turnaround in summer 2022. Around 150 individual and portfolio transactions were recorded in the first half of 2022.
- The transaction volume fell short of the 5-year and 10-year averages for the first half of the year by 75 per cent in each case.
- Core office transactions have been the exception in the year to date, while core-plus and value-add office investments account for just under 65 per cent. In the same period of the previous year, the share of these two risk classes was still around 47 per cent.
Yields: Yield corrections in the core segment not over yet
- At the end of Q2 2024, the average prime office yield for core properties in the top 7 markets was 4.91 per cent. Compared to the end of Q2 2023, the average prime yield has therefore increased by 87 basis points. Compared to the previous quarter, the increase was 13 basis points.
- Both sellers and buyers are still very cautious when it comes to core investments, which is inevitably reflected in the purchase price expectations.
- Sellers without refinancing pressure are waiting for stable to slightly rising purchase prices. In addition, investors who still have to provide a high equity deposit are still holding back in anticipation of lower and more reliable interest rates.
- The lowest prime office yields are currently being achieved in Munich and Berlin at 4.60 per cent and 4.80 per cent respectively. Düsseldorf and Cologne are at the upper end at 5.10 per cent.
- Compared to the previous quarter, prime office yields in the top 7 markets have risen by between 10 and 20 basis points in each case.
Markets: Top 7 markets remain favoured investment locations
- The majority of the office transaction volume across Germany was realised in the top 7 markets. A total of around EUR 1.50 billion was invested here in the first half of 2024 (H1/2023: EUR 1.36 billion), which corresponds to a 64 per cent share of take-up (H1/2023: 58 per cent).
- In the year to date, the most capital has been invested in office properties in Frankfurt with around EUR 395 million, closely followed by Munich with EUR 375 million and Berlin with EUR 320 million. Düsseldorf follows at a considerable distance with just under EUR 170 million. The lowest office transaction volume was registered in Cologne and Stuttgart, both below the 100 million euro mark.
- The B markets accounted for around 10 per cent and 240 million euros respectively of the total office transaction volume. This is around 25 per cent less than in the same period of the previous year. The most significant transaction to date is the recently completed new office building West-Side-Park on Václav-Havel-Platz in Bonn from Swiss Life Asset Managers to Imaxxam.
- A total of around EUR 170 million has been invested in office properties in the C and D markets in the year to date (7 per cent share of sales). Compared to the previous year, the transaction volume here has more than halved (-53 per cent).
