Colliers International: Activity on Frankfurt investment market remains lively
- Transaction volume of around €6.1bn in 2016
- Previous year results once again exceeded
- Ongoing prime-yield compression
Frankfurt/Main, 6 January 2017 – According to Colliers International, a transaction volume of €6.1bn was recorded on the Frankfurt commercial investment market in 2016, reflecting roughly an 8% increase over the previous year’s already excellent results. This is the 7th consecutive increase in transaction volume.
Robert Menke, Managing Director of Colliers International Frankfurt, says, “In 2016, the Frankfurt market was dominated by mega deals exceeding €100m. Combined, the eight largest transactions account for almost half of recorded total volume. These include the Commerzbank high-rise (€675m), Taunusturm (€650m) and IBC on Theodor-Heuss-Allee (€400m). The market again benefited from an unparalleled end-of-year rally with almost 50% of total transaction volume generated in the last three months of the year.”
Office properties dominate market
In 2016, office buildings remained the most coveted asset class in Frankfurt. According to Robert Menke, “A total of 90% of investment volume can be attributed to office properties. All of the mega deals that were transacted for more than €100m involved office buildings. Hotels also continue to be popular with investors. At around €547m, hotel transaction volume more than doubled yoy. Due to limited supply, only a small number of retail assets changed hands in 2016.”
Ongoing prime yield compression due to supply bottleneck
In the last 12 months, strong demand for core and core plus properties again met with limited supply, leading to ongoing yield compression. (Gross) prime yields for office properties in the CBD fell 30 basis points to a current 4.2%. Prime yields for retail properties in high street locations (3.5%) and logistics properties (5.4%) continued to drop as well.
Portfolio deals contribute to strong annual result
In 2016, portfolio transactions became more important compared to the previous year. Their share in 2015 transaction volume of 20% increased to 24% in 2016. Significant transactions in Frankfurt included the Officefirst and Max & Merle portfolios.
Asset/fund managers were especially active in 2016 both buy and sell side, purchasing assets for around €1.7bn and selling assets for around €1.4bn. “Asset/fund managers often act on behalf of German and foreign investors. In 2016, they were mostly involved in large-scale transactions such as Samsung Life Insurance’s acquisition of Commerzbank Tower and GEG German Estate Group AG’s purchase of IBC,” says Robert Menke.
Banking district with highest demand
Continuing the trend of previous years, properties in the CBD remained in high demand. “The CBD investment market is dominated by the Bankenviertel submarket, which accounted for a transaction volume of €1.8bn in 2016,” says Robert Menke. “The City and Westend submarkets trailed behind at some distance with volumes of €241m and €307m, respectively, as they mostly accounted for smaller-scale transactions valued at up to €20m. However, the Airport submarket posted a strong result in 2016 due to the SQUAIRE deal and a number of transactions at the Gateway Gardens office center.
Outlook: High demand to continue
The Frankfurt investment market is in very good shape due to the favorable economic situation, a lack of strong investment alternatives and ongoing high demand for commercial assets. At the same time, supply is limited. “In the years to come, Frankfurt will remain one of the most attractive markets in Europe, both for German and foreign investors. However, high demand is facing a limited supply of stock properties and new-build developments. We expect results to remain stable at a consistently high level in 2017,” concludes Robert Menke.