Cushman & Wakefield, one of the world's largest property consultancies, recorded a total transaction volume of EUR 5.13 billion on the German office investment market in 2024. Around €1.48 billion of this was transacted in the period from October to December, meaning that the 4th quarter exceeded the volumes of the 1st, 2nd and 3rd quarters. Core office transactions remained rare over the past 12 months.
Helge Zahrnt, Head of Research & Insight Germany at Cushman & Wakefield, comments: ‘The transaction volumes indicate the start of a new market cycle, which will increasingly pick up over the course of 2025 in a further improving interest rate environment. The investment focus will increasingly shift back towards the top office locations, as the investment-ready supply will also improve considerably thanks to modern and attractive office completions with already high pre-letting rates.’
Transaction volume: transaction momentum at the previous year's level
- At around 170 registered office transactions, transaction momentum remains almost at the same level as the previous year (176 transactions). However, there was a slight increase in large transactions above the €100 million mark: 10 such transactions were recorded in the past 12 months, two more than in 2023.
- In contrast, the average purchase price per office transaction also increased to around €29 million compared to €24 million in 2023.
- The sale of the ‘Rossio’ office project in Cologne for €270 million to the City of Cologne in Q3 2024 is the largest transaction of the year and also the largest since 2022.
- The significant price adjustments for office properties as a result of the turnaround in interest rates prompted many investors to invest more in value-add and opportunistic office investments in 2024. Project developers, family offices and a few institutional investors are recognising attractive potential for value appreciation and exits through refurbishment or conversion measures, particularly against the backdrop of an expected medium-term market recovery.
- The share of owner-occupier transactions has also risen to around 15 per cent in 2024, compared to 9 per cent in the previous year. In 2021, one year before the interest rate turnaround, the owner-occupier share was just under 4 per cent. The majority of such purchases are made by corporates and the public sector.
Yields: Core office properties now offer an attractive risk premium compared to German government bonds
- Following a recent slight increase in prime office yields in the 2nd quarter (+13 basis points compared to the 1st quarter), prices for core office properties within the top 7 markets stabilised and yields bottomed out in the 4th quarter.
- The prime yield for core office properties was therefore 4.91% at the end of Q4 2024 (end of 2023: 4.78%).
- The most expensive locations and therefore the lowest prime yields for premium properties continue to be achieved in Munich at 4.60 per cent and Berlin at 4.80 per cent. Hamburg and Frankfurt are currently quoted at 4.90 per cent. Düsseldorf and Cologne, on the other hand, have the most attractive and highest prime yields for core properties at 5.10 per cent each.
- The willingness of many investors to buy is likely to increase again due to the further rise in the risk premium compared to German government bonds. At the end of 2024, the yield spread between 10-year German government bonds and the average prime office yield in the top 7 markets was 258 basis points, compared to 221 basis points 12 months earlier.
Top 7 markets: office properties are in high demand
- By far the most capital invested in office property is accounted for by the top 7 markets. With a total of around €3.79 billion in 2024, this corresponds to a 74 per cent share of the office transaction volume across Germany. This share was last higher in the 3rd quarter of 2022 at 80 per cent.
- The office transaction volume in the top 7 markets has also increased by around 53 per cent compared to 2023 as a whole.
- Last year, the highest take-up of all seven top locations was achieved in Germany's banking metropolis of Frankfurt am Main with a total of €990 million. Hamburg and Berlin followed with €790 million and €740 million respectively. The lowest office transaction volume was registered in Düsseldorf with €260 million and Stuttgart with €190 million.In the B markets, the office transaction volume increased only slightly in 2024 as a whole - by around 7 per cent to EUR 580 million.
- A significant upturn on the C and D markets was barely noticeable at times. Both the transaction momentum and the office transaction volume remained far below the result from 2023 (around EUR 800 million). In 2024, the volume totalled just under €250 million.
