Cushman & Wakefield has recorded a transaction volume of EUR 11.16 billion for the commercial investment market in Germany in the first half of 2024. Compared to the same period last year, this corresponds to an increase in turnover of 22 per cent. Despite the ECB’s first interest rate cut, volatility and yield levels on the German bond market remain high. In addition, the high level of interest rates continues to curb the willingness of institutional investors to invest and core transactions were still only rarely registered.
Simon Jeschioro, Head of Capital Markets & Investment Advisory Germany at Cushman & Wakefield, explains: “Although the recovery on the investment market is only progressing slowly, we are already seeing increased momentum in terms of willingness to sell. Institutional investors are increasingly focusing on office property again in their investment strategies, but with a clear focus on high building and location quality. Within the top 7 markets, we expect attractive investment opportunities in the coming quarters, not least due to the high number of office completions.”
Transaction volume: Transaction volume significantly exceeds previous year’s result
- Several large-volume individual transactions in the triple-digit million euro range have brought the investment market a significant increase in turnover. At EUR 5.55 billion, the transaction volume in the 2nd quarter was only slightly lower than in the 1st quarter of 2024 (EUR 5.61 billion).
- The largest individual transactions in the first six months of the year were the sale of Berlin's KaDeWe department store for EUR 1.0 billion from Signa to the Thai Central Group in the second quarter and the sale of the “Fünf Höfe” shopping centre in Munich for over EUR 700 million from Union Investment to the Strüngmann family's Athos family office in the first quarter.
- Despite the ECB’s first interest rate cut in June 2024 and a further decline in inflation towards the 2 per cent target, the level of bonds and debt financing remains high and continues to be challenging for institutional investors.
- The transaction volume is low compared to the 5-year average of EUR 22.31 bn for the respective first half of the year.
- The proportion of foreign capital and its investments in German property has increased significantly and gradually. In the first half of 2024, the share was around 37 per cent (H1/2023: 29 per cent). It is noticeable that institutional investors, particularly from North America and Asia, have once again increasingly made larger transactions of over EUR 100 million.
Yields: Further yield corrections in the office segment, retail and logistics properties unchanged
- While prices and yields in the core segment of retail and logistics properties continued to stabilise over the course of the year, prime yields in the office segment rose once again.
- 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 2nd quarter of 2023, the average prime yield has therefore increased by 87 basis points. Compared to the previous quarter, the increase is 13 basis points.
- 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 have exceeded the 5.00 per cent mark and are currently trading at 5.10 per cent.
- As in the previous quarter, the average prime yield for city centre commercial properties stood at 4.46% at the end of Q2 2024. In the 2nd quarter of 2023, the average prime yield was 3.99 per cent.
- The average prime yield for core logistics properties was also unchanged at 4.50 per cent in the second quarter of 2024. Compared to the previous year, this is an increase of 35 basis points.
Types of use: No dominance among types of use
- In terms of the distribution of the transaction volume, logistics, retail and office are almost equal in terms of their share of investment turnover at 21 to 23 per cent.
- Logistics and industrial properties continued to account for the highest transaction volume in the first half of the year with a total of EUR2.59 billion (23 per cent share of turnover). Compared to the previous year, this represents an increase in turnover of around 53 per cent. Numerous large-volume portfolio transactions from the first quarter contributed to the positive result, above all the EUR 320 million acquisition of shares in five logistics properties from Swiss Life and Beos to LaSalle Investment Management. At around EUR 990 million, turnover in Q2 2024 was also significantly lower than in Q1 (EUR 1.61 billion) due to fewer revenue-driving package sales.
- At EUR 2.46 billion and a 22 per cent share of turnover, retail properties were able to maintain their position as the second strongest type of use. Compared to the previous year, this corresponds to an increase in turnover of almost 45 per cent. At around EUR 1.0 billion, the sale of Berlin’s KaDeWe department store by the insolvent Signa Holding to the Thai Central Group is largely responsible for the positive sales result. Signa Holding also sold its retail property at Wehrhahn 1 in Düsseldorf in the second quarter, with the city of Düsseldorf acquiring the former department stores' for just over 100 million euros for the construction of the new opera house. RFR acquired a further seven Galeria-Karstadt department stores from Signa’s portfolio. In the year to date, transactions involving retail properties have been characterised by individual transactions of up to EUR 50 million. So far, only one portfolio sale in the three-digit million euro range has been registered.
- The volume of office transactions fell short of the previous year's turnover (-1 per cent), although some large-volume portfolio and individual transactions led to an increase in turnover in the 2nd quarter. In total, office transactions with a volume of EUR 2.34 billion were registered in the first half of 2024, EUR 1.37 billion of which took place between April and June. The majority of investors focused on core-plus and value-add properties, while core transactions were rare. The most important transactions included the sale of the S-Immo AG portfolio consisting of 19 office properties to the Livos Group for around EUR 255 million. The AOK Bundesverband also parted with a total of 31 office properties. The sale of the Access Tower in Frankfurt by Publity for just under EUR 100 million is also worth mentioning.
- Within the other types of use with a total transaction volume of around EUR 3.28 billion, mixed-use properties with a focus on commercial use were traded in particular. Around 51 per cent, or EUR 1.69 billion, of the other transaction volume was therefore attributable to mixed-use properties.
One significant transaction was the acquisition of the “Fünf Höfe” in Munich in the first quarter by the Athos family office of the Strüngmann family for over 700 million euros from Union Investment. Commerz Real also secured Maximilianstrasse 12–14 in the city centre from the Centrum Group for over 200 million euros. Compared to the previous year, the transaction volume of mixed-use properties achieved an increase in turnover of 52 per cent.
- Hotel properties were traded for a total of around 470 million euros in the first half of the year and achieved a turnover share of just under 4 per cent. Compared to the first half of the previous year, this corresponds to an increase of 42 per cent.
Top 7 markets: significant increase in turnover
- Around EUR 5.99 billion was invested in the top 7 markets, which corresponds to a 54 per cent share of the total German transaction volume. For the first time since the 4th quarter of 2022, these markets once again accounted for more than half of the total German transaction volume. In the same period of the previous year, the share was 45 per cent.
- In total, around EUR 1.90 billion more was invested in the seven top German locations in the first half of 2024 than in the previous year (up 46 per cent).
- Due to large-volume individual sales, Berlin and Munich are the strongest individual markets in terms of sales to date, totalling EUR 1.90 billion and EUR 1.44 billion respectively. Cushman & Wakefield recorded the lowest sales results for Hamburg (EUR 465 million) and Stuttgart (EUR 100 million).
