April 11, 2012, Munich – In the first three months of 2012, about € 5.1 billion was invested in commercial real estate, nearly 10% less than in the first quarter of the previous year. “The reason for this moderate decline is that the number of very high-volume sales is lower,” explains Andreas Trumpp, Head of Research at Colliers International, Germany. “While the ten largest transactions of last year accounted for over 2.8 billion euros in volume, the total is just under 1.6 billion this year.” Nearly € 2.8 billion was invested in the country’s six top locations – Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart. “A year ago, by contrast, most of the transaction volume was based on large-volume sales of retail properties outside of the actual centers of the real estate industry. The situation in 2012 is completely different,” Trumpp says. In the first quarter of 2012, international investors invested about € 1.5 billion in commercial properties in Germany, accounting for 29% of the total transaction volume. At about € 1.2 billion, approximately 23% of the capital invested was expended as part of portfolio transactions.
Office properties drawing investors’ focus
While retail properties attracted the most attention from investors last year, office real estate was the clear focus of investment activity in the first quarter of 2012. At € 2.6 billion, about half of the total transaction volume was earned on sales of office properties. “The good figures for take-up of space and declining vacancy levels noted in 2011 were probably among the major factors in this development,” Trumpp says. Demand for office properties was already up considerably starting around the middle of last year. An additional € 1.1 billion was invested in retail properties, which accounted for 21% of the transaction volume. The biggest sales to date have been the sales of the headquarters of insurer Allianz, in Unterföhring, near Munich, for more than € 300 million, and of a 56.95% share in the Trianon, in Frankfurt, which brought over € 230 million.
Relatively balanced groups of buyers
Five groups of buyers accounted for double-digit shares of the transaction volume, with no one single group really standing out from the rest. Open-ended real estate funds and special real estate funds invested about € 900 million (18% market share) in the first three months of the year, followed by closed-ended real estate funds, at € 730 million, and risk-oriented opportunity funds and private equity funds, at € 709 million (14% each).
Noteworthy gains in almost all top locations
In almost all of the most important centers of Germany’s real estate sector, transaction volume was considerably higher in the first quarter of 2012 than in 2011. “In all, just under 2.8 billion euros was invested in the top six locations, nearly double the result for the previous year,” Trumpp says. “The increase was especially striking in Stuttgart, where the transaction volume came to 325 million euros as a result of the sale of the Postquartier property for over 130 million euros, putting the figure more than five and a half times higher than at the start of last year.” Berlin was the only market to see a decline, with a lack of large-volume sales behind a decrease of 22%, to € 387 million. The top location in terms of volume was Munich, at € 727 million, followed by Frankfurt, at € 579 million, and Hamburg, at € 500 million.
Hardly any movement in prime yields
Prime yields for top-class office properties became more expensive than last year in only two markets, Frankfurt and Hamburg, where figures shifted by 10 base points, to 5.20% and 4.70%, respectively. Compared with the immediately preceding fourth quarter of 2011, however, no change was noted. Munich remains the most expensive location, at 4.50%; prime yields held steady there, as well as in Berlin (5.00%), Düsseldorf (5.25%), and Stuttgart (5.40%).
Outlook: transaction activity continues
The commercial real estate market in Germany got off to a good start in 2012 and continues to move forward. “Good figures for take-up of space on the leasing market have put office properties back in the spotlight with investors. As a result, there are a number of large-volume individual transactions in concrete talks now, with signings expected in the second half of the year,” Trumpp says, outlining his expectations. Sales in the retail segment are also expected to pick up again as the year progresses.