Office deals have accounted for more than half of all investments made into the German commercial market in the first quarter of 2018.
CBRE has calculated that €6.8 billion of capital was placed into the German office sector, around €1.3 billion more than in the first quarter of 2017. At just under €2.7 billion, almost 40 percent of the transaction volume was accounted for by international investors. Their share was just as high as in first quarter 2017, but in absolute figures they invested almost €500 million more.
Investors focused on Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart and nearly 90 percent of office transaction volume, worth €5.9 billion, was allocated to Germany’s top seven locations. Volume has declined on regional and B locations, mainly due to a lack of large-volume nationwide portfolios, according to CBRE’s head of investment in Germany, Fabian Klein.
“The large-scale trophy buildings so popular with international investors in particular are largely to be found in the top locations,” he says.
Along with European investors, North American (8 percent of the overall volume) and Asian investors (4 percent) were particularly active. Klein attributes this to sound economic growth and strong fundamentals, “above all in the labor market and the ongoing favorable interest rate environment.”
Compared with the fourth quarter of 2017, net initial yields in most of the country’s markets remained stable in first quarter 2018, despite uninterruptedly high demand and a pronounced supply shortage. The average net initial yield of 3.26 percent across the top seven investment markets dropped only marginally below the first quarter 2017 figure of 3.28 percent. Only Hamburg reported a larger decline of 10 basis points.
“Germany continues to be viewed as one of the most attractive and secure investment markets in Europe, both by domestic and foreign investors,” says Klein.
“[It] is set to remain extremely attractive to investors due to the steady and strong demand for office space in the top locations, with rising rents, historically low vacancy rates and property developments pre-let at an early stage.
“We anticipate a transaction volume of at least €25 billion in the full-year 2018.”
