October 15, 2012, Munich – Transaction volume on the commercial investment market in Germany stood at some € 14.5 billion at the end of the third quarter of 2012. That works out to a decline of approximately 13% from last year, which was marked by high volumes, despite brisk activity this summer. “Since the total number of sales is on a level comparable to last year, the lower number of signings for more than 100 million euros is the main reason for the lower transaction volume,” says Andreas Trumpp, Head of Research at Colliers International, Germany. "The segment comprising these large transactions stood at 2.8 billion euros this year, down from 4.1 billion in 2011", he adds. The biggest sales this year include the acquisition of the majority of shares in the Milaneo shopping center, in Stuttgart, by Hamburg Trust, with an investment volume at about € 400 million. The largest sales of office properties shown in the statistics to date for 2012 were the sale of the administrative offices of insurer Allianz, in Unterföhring, for over € 300 million, and that of the Maximilianhöfe property, in Munich, for about € 270 million. Foreign investors accounted for some 26%, or € 3.8 billion, of the transaction volume at the end of the third quarter. Relatively few sales thus far have involved large-volume commercial portfolios, so their share of the total sales volume has slid from 31% in 2011 (€ 5.2 billion) to 19% this year (approximately € 2.8 billion).

Office properties favored most by investors
From January through September, approximately € 7.0 billion, or about 48% of the overall commercial transaction volume, was invested in office properties. Retail properties came in second, at nearly € 3.7 billion and market share of 25%. This situation represented a nearly exact reversal of the allocation of market share last year. Mixed-use properties, such as Stuttgart’s Postquartier or the Quartier 207 property, in Berlin, placed third, at some € 1.2 billion. “The fact that investors are focusing on office properties is due to a number of factors, including last year’s excellent leasing performance,” Trumpp comments. “Long-term lease agreements were signed or renewed in 2011 in many of the properties that have now been sold.”

Security-oriented investors invest the most
The largest single portion – 40% – of the capital invested in German commercial properties by the end of the third quarter comes from security-oriented investors. Open-ended and special real estate funds together invested a total of about € 2.3 billion, while closed-ended real estate funds invested approximately € 1.8 billion and private investors about € 1.7 billion. “One noteworthy development here is the large number of purchases made by private investors,” Trumpp points out. “Not including portfolio purchases, private investors spent a little under 9 million euros per property on average, while the figure for open-ended real estate funds and special real estate funds was approximately 28 million euros and even more, at almost 47 million euros, for closed-ended real estate funds,” he adds. This means that from the perspective of many wealthy private investors, real estate continues to represent a more worthwhile investment than alternative options.

Top locations attract majority of capital
Transaction volume in the six centers of real estate activity surveyed stood at some € 8.0 billion, an increase of 15% year on year. “In light of the fact that three of the ten largest sales this year have taken place in the Munich area, it is no wonder that the Bavarian state capital leads the pack, at nearly 2.3 billion euros in transaction volume,” Trumpp says. Berlin ranks next, at about € 1.9 billion, followed by Hamburg, at around € 1.3 billion. In another noteworthy development, Frankfurt and Stuttgart are nearly tied, at € 1.1 billion and € 1.0 billion, respectively. In Frankfurt’s case, transaction volume is down 45% year on year because few large-volume sales have been finalized so far this year. In Stuttgart, by contrast, transaction volume has increased by nearly 300%, due primarily to the sale of the Milaneo and Postquartier properties.

Little movement in prime yields
The development of prime yields for first-class office properties continues to be largely stable. In Munich (4.50%) and Hamburg (4.70%), the two most expensive locations, prime yields held steady, as they also did in Berlin (5.00%) and Stuttgart (5.20%). In Düsseldorf (5.20%) and Frankfurt (5.15%), the prime yields fell slightly, by 5 base points in each case.

Outlook: transaction volume of € 20 billion realistic
The supply of good newly constructed properties, especially office properties, is dwindling due to low completion figures, even though investors are focusing in particular on these products. The fact that prime yields are holding steady at a low level is one indication of this situation. Aside from a few exceptions, investors continue to be reluctant about value-added and opportunistic investments. “Nonetheless, we expect that the transaction volume of about 20 billion euros that we had forecast at the start of the year will be achieved based on the sales processes currently in progress,” Trumpp concludes.