18 July 2011, Munich – This year’s strong start was followed by a similarly brisk second quarter, with transaction volume nearly the same as in the three months before. “In total, the volume invested in commercial real estate during the first half of 2011 comes to some €11 billion. This is a significant increase – 24% – by comparison to the same period of last year,” says Andreas Trumpp, Head of Research at Colliers International in Germany, “In light of the first half year results and sales currently in negotiations, we continue to stand by our earlier forecast of over €20 billion in transaction volume in the commercial investment market this year.”
At the close of the first half of the year, open-ended and special real estate funds accounted for transaction volume of about €2.3 billion, just ahead of investors with an opportunistic or added value-oriented investment profile, who also accounted for about €2.3 billion in transaction volume. Closed-ended real estate funds accounted for about €1.9 billion and project developers for approximately €1.3 billion, which meant that both groups also made up noteworthy portions of the transaction volume. Nearly 38% of the investors were based outside Germany.
“In the first quarter, most of the investment volume went toward locations outside of the traditional real estate centers as a result of various factors, including large-volume transactions such as the sale of the Metro portfolio and a 50% share in the CentrO shopping and leisure center in Oberhausen. Then, in the second quarter, investors resumed their activities in traditional locations, especially in Frankfurt and Hamburg, each of which saw about €1 billion in capital invested in the period from April to June alone,” Trumpp emphasizes. In all, investment in the cities of Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart came to €4.5 billion, slightly less than 41% of the total transaction volume.
The biggest office transaction to date this year took place in the second quarter, when a closed-ended DWS fund invested nearly €584 million in the Greentowers development, in Frankfurt, which is occupied by Deutsche Bank. The two office buildings underwent extensive renovations that were completed recently. “All in all, though, retail properties continued to lead all other use categories by a wide margin at the close of the first half of the year. Investors put some €5.9 billion into retail real estate, nearly twice as much as they invested in office properties, at just under €2.9 billion,” Trumpp says. “These categories are trailed at a significant distance by a near tie between hotel properties, at about €582 million, and warehouse, logistics, and industrial properties, at about €573 million, indicating that the latter groups are still more in line with the investment profile of specialized investors,” he adds. The biggest transactions in the hotel segment include the sale of the Grand SPA Resort A-ROSA Sylt for nearly €63 million. The warehouse, logistics, and industry segment is represented among the top ten biggest transactions so far this year by the sale of the ING Industrial Fund portfolio for about €160 million.
“Transaction volume in Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart has increased significantly in the past three months, reaching some €4.5 billion at the end of June, slightly over the previous year’s level,” Trumpp says. Only two cities are responsible for these gains, however. Transactions including the sale of the Greentowers pushed investment volume in Frankfurt to about €1.31 billion, an increase of 281% over the previous year; in Hamburg, investments totaled about €1.25 billion, about 148% more than in 2010. All other cities suffered significant declines to one degree or another. The lack of major transactions such as those finalized in the first six months of 2010 resulted in lower transaction volumes this year, although the number of deals, and thus market activity levels, increased year on year in all of the cities analyzed by Colliers, in some cases by a considerable margin.
Prime yield values remained unchanged in all of the cities analyzed except Hamburg and Frankfurt, the two cities with the strongest sales figures: The prime yield for an ideal office property fell by ten base points from the previous quarter in both markets, to 4.70% in Hamburg and 5.20% in Frankfurt. At 4.50%, Munich remains the most expensive location. First-rate office properties are more favorably priced in top locations in Berlin (5.00%), Düsseldorf (5.25%), and Stuttgart (5.40%).
On the whole, the investment market is being buoyed by excellent overall economic trends, positive development on the office leasing market in particular, and a lack of investment alternatives. The focus on core products is gradually subsiding somewhat in favor of riskier investment options, although high levels of interest have not yet yielded a large number of finalized transactions.