Cushman & Wakefield, one of the world's largest real estate consultancies, has recorded a total transaction volume of EUR 3.65 billion for the office investment market in Germany in the first three quarters of 2024. This corresponds to an increase in turnover of around 11% compared to the same period of the previous year and thus indicates a slowly emerging market recovery.
Helge Zahrnt, Head of Research & Insight Germany at Cushman & Wakefield, comments: “The office transaction volume is still well below the 5-year average of EUR 14.7 billion. However, with prime yields now bottoming out and interest rates continuing to fall, the willingness to buy and sell should also increase again across the market. There is still little movement in the core segment, while transaction momentum has stabilized overall in recent months.”
Transaction volume: transaction momentum at the previous year's level
- For the first time since the 2nd quarter of 2022, the volume of office transactions in Germany has increased again. However, transaction momentum for office properties is only developing slowly, in line with the German investment market as a whole.The main reasons for the increase in turnover compared to the previous year are a significantly higher transaction volume with package sales and a single transaction for €270 million. The total number of office transactions (individual and portfolio transactions) stagnated at the previous year's level (138) at 135.
- Package sales totaled just under €600 million in the first three quarters of 2024. A year earlier, sales amounted to just under €280 million.
- In Cologne, the city acquired the “Rossio” office property under construction from Strabag Real Estate for its own use for EUR 270 million. The sale represents the largest office transaction since 2022.
- Just under half of all office sales (47%) fell into the value-add and opportunistic risk categories and were largely attributable to project developers, but also to private individuals and family offices.
- Following a recent slight increase in prime office yields in the 2nd quarter (+13 basis points compared to the 1st quarter), there were signs of price stability and a bottoming out of yields for core office properties within the top 7 markets in the 3rd quarter.
- The prime yield for core office properties at the end of Q3 2024 was 4.91%, 42 basis points above the previous year's level.
- In the 3rd quarter of 2024, the average yield for German government bonds with a 10-year term was around 2.31%. The yield spread to the average prime office yield in the top 7 markets is therefore 260 basis points. In the previous year, the risk premium was still at a low 191 basis points.
- With bond yields tending to fall slightly further and prime yields for office properties remaining stable, the risk premium for core office properties is likely to increase slightly and thus attract the interest of institutional investors again.
- The fact that prime rents in the top 7 markets have risen significantly since the turnaround in interest rates in 2022 and that there is attractive potential for re-letting in many places should also encourage the willingness to buy.
Top 7 markets: significant increase in the German office strongholds
- The top 7 office locations are the clearly preferred investment target of many investors for office acquisitions. At around EUR 2.40 billion, around 23% more was invested in the first nine months of 2024 than in the previous year.
- The share of the office transaction volume in the top 7 markets in the overall German office volume also rose to 66% (Q1-3 2023: 59%).
- Frankfurt ranked first among the top office investment destinations with €680 million, followed by Munich with just under €450 million.
- Thanks to the major transaction, a total of €370 million was invested in office properties in Cologne, more than in Berlin (€320 million).
- In the B markets, the transaction volume totaled EUR 580 million, almost 6% less than in the same period of the previous year.
- In contrast, there has been a distinct lack of large-volume transactions in the C and D markets so far this year. Here, the majority of office sales were limited to purchase prices up to a maximum of EUR 50 million, resulting in a total turnover of just under EUR 220 million. In the previous year, three times as much was transacted in these markets (EUR 600 million).
