January 10, 2013, Munich – The commercial investment market in Germany ended with a transaction volume of more than €25.4 billion in 2012, exceeding expectations at the start of the year. Ignaz Trombello, Head of Investment at Colliers International, Germany, says, “The ten percent increase compared to 2011 primarily results from the fact that investment activities picked up momentum in the last quarter. Five of the ten major deals in 2012 alone were concluded in the last three months.” The TLG commercial portfolio acquired by Lone Star and the Karstadt property purchased by Signa Holding, each with a volume equal to around €1.1 billion, were noteworthy transactions. The share of package sales in the transaction volume at the end of 2012 was recorded at 23% (€5.9 billion) primarily because of these portfolios, placing it just above the level recorded in 2011. Foreign investors, who were involved in eight out ten of the year’s biggest deals, invested approx. €9.6 billion in Germany, around €1 billion more than in 2011.
Office real estate has highest market share – core properties continue to be most demanded asset class
By the end of 2012, German and foreign investors had invested almost €11.7 billion in German office real estate, giving office property an approx. 46% share of total transaction volume. Retail property came in second with investments totaling almost €6.8 billion, losing its 2011 first place position, which had resulted from numerous large-volume sales. Mixed-use properties generated around €3.1 billion or 12% of the transaction volume. Ignaz Trombello comments, “A large number of the office properties sold in 2012 were highly attractive investment opportunities because of the good occupancy rates resulting from new lease agreements and term of lease extensions made in the past two years.” He adds, “Other investments on the other hand, such as TLG, have the potential to increase in value and to up cash flow through active asset management practices.”
Broad investor base without dominant demand industries
Andreas Trumpp, Head of Research at Colliers International, Germany, stresses, “Many investors found the German commercial investment market attractive in 2012, partially because of the lack of investment alternatives. This is reflected by the fact that ten buyer groups recorded a transaction volume of over one billion euros each so that no single industry was dominant.” In the past few years, one or two buyer groups tended to stand out from the rest of the investors. All in all, most of the capital in 2012 was invested by open-ended real estate funds and special funds with approx. €4.4 billion (17% market share), followed by asset / fund managers with €3.2 billion (13%) and private investors and family offices, which invested around €2.8 billion (11%).
Prime locations attract the most capital
The six real estate centers surveyed, Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart, were able to expand their share of the total transaction volume in Germany compared with 2011. Andreas Trumpp says, “Altogether around 14.6 billion euros were invested in the top 6 cities in 2012. That’s a good 31 percent more than in 2011. This trend continued throughout the year and will persist in 2013 as well.” At the end of the year, Berlin was the front runner with a transaction volume of €4.1 billion, up 86%, followed by Munich with a solid €3.7 billion (+29 %) and Frankfurt with €2.9 billion (+5 %). Among the attractive, large-volume investments, special mention goes to KaDeWe’s share of the Karstadt portfolio of around €500 million and the Neues Kranzler Eck property with an investment volume of more than €350 million in Berlin, the Maximilianhöfe with an investment volume of €270 million and the Palais an der Oper in Munich and the Palais Quartier with an investment volume of around €450 million and Die Welle with an investment volume of around €400 million in Frankfurt. In Stuttgart, the share sale of Milaneo at approx. €400 million led to a 218% increase in the transaction volume. In Düsseldorf, the sale of Sky Office in the amount of around €125 million made up a large share of the total volume of €800 million (+19%). Hamburg was the only city to experience a decline in transaction volume in 2012 at around €1.9 billion, since there were not enough large-volume transactions worth mentioning.
The market for prime properties continues to grow
Compared with 2011, first-class office real estate in Stuttgart’s top locations went up 20 base points with a top yield of 5.20%. Office real estate prices went down in Frankfurt and in Düsseldorf by 5 base points to 5.15% and 5.20%, respectively. There was little change in real estate prices in Munich (4.50%) and Hamburg (4.70%), Germany’s most expensive locations, as well as in Berlin (5.00%).
Outlook: Transaction volume limited by lack of availability
Ignaz Trombello says with confidence, “The transaction volume could have been much higher if more investment products had been available in 2012.” He adds, “We feel that availability will be the factor to limit transaction volume in 2013. All in all, we expect a result of more than €20 billion in 2013 with steady demand and stable to slightly decreasing top yields. If the market for value-added products, which are increasingly in demand, takes off and we once again see financing possibilities in this sector, the numbers could be even higher.”