Berlin: Investment Market, 1st-3rd Quarter of 2017
New quarterly high and €6bn
Berlin, 04 October 2017. At the end of the 3rd quarter the sale of the “Sony Center” was announced shortly before the start of the Expo Real; it lifted the total of investments in commercial properties in Berlin to its best result since Grossmann & Berger started keeping a record. The total was €6bn. “Even without this 1.1 billion-euro sale the volume of transactions was at its highest ever for the first nine months of a year,” says Holger Michaelis, managing director of Grossmann & Berger, a member of German Property Partners (GPP). “This transaction allowed Berlin to break through the 5-billion euro barrier for the first time at the end of the third quarter.” Including this outlier trade, the result was 79% higher than in the same period a year before. Berlin thus posted a result that is already far above its five-year average of €5.02bn.
Twice as many big-ticket trades
The “Sony Center” (Potsdamer Platz/Leipziger Platz sub-market) was sold by the Korean National Pension Service (NPS) to Oxford Properties, the real estate subsidiary of the Canadian pension fund Omers, and Madison International Realty, an investment company from the USA; it was the biggest and most prominent transaction on the Berlin market to date. The number of trades in the price category €50m and over and those in the €100m-plus bracket both doubled, to fourteen each.
Focus on central sub-markets
As a result of the “Sony Center” changing hands, Potsdamer Platz/Leipziger Platz found itself in the unusual position of sub-market with the highest transaction volume. The total came to one fifth (€1.19bn) of the overall sales value. The next-biggest transactions, the sale of the “Springer new build” and of the “Axel-Springer-Passage” mall were likewise completed in the 3rd quarter, so that the traditionally sought after Mitte 1a sub-market attained a share of 17% of the total volume (€1.01bn). The Norwegian State Fund (Norges) was successful in its €425m bid for the “Springer new build” at Axel-Springer-Strasse 64 and Blackstone bought the “Axel-Springer-Passage” (Axel-Springer-Strasse 66) for some €330m.
New investment hot spots
In the next busiest sub-markets, Periphery South (10% or €576m) and Friedrichshain (8% or €492m) business was dominated by two large-volume trades. The former “Vattenfall Building” at Puschkinallee 52 in the Periphery South sub-market was purchased in the 1st quarter by the Federal real estate corporation Bundesanstalt für Immobilienaufgaben (BIMA) for €183m to provide new premises for the Federal Criminal Police Office, BKA. The “Zalando headquarters” on Valeska-Gert-Strasse in the Friedrichshain sub-market likewise changed hands in the 1st quarter, sold by UBM Development to
Capstone Asset Management for €196m. “These investments show how the neighbourhood surrounding the Mercedes Benz Arena has been sustainably enhanced and established as a good location thanks to the activities of Anschutz and numerous other project developers over the past ten years and more. Moreover, in the development areas along the Stralauer Allee north of the River Spree that are intended to relieve pressure on the city centre, only a few larger office suites in scattered development projects remain available,” remarks Ulrich Denk, investment consultant and researcher at Grossmann & Berger.
Office properties booming
Since, without exception, all the Berlin transactions costing more than €100m involved existing or projected office blocks, offices remained the most popular property investment asset with 77% of the total (€4.61bn). Neither hotels (9% or €564m) nor retail buildings (8% or €486m) attracted a double-digit share of the investment volume, although three new trades in hotel assets and one trade for a retail property valued at over €50m each were noted in the 3rd quarter.
Prime net yields still above three per cent
“In view of the enormous demand for large office properties we were surprised that the prime net yield in Berlin has not yet slipped below the three per cent mark,” says Denk. Year on year the prime net yield on offices fell by 60 basis points to 3.10%, on commercial buildings it fell by 30 basis points to 3.00%.
International investors account for almost four fifths of purchases
Year on year the proportion of international actors buying and selling commercial properties in Berlin had doubled by the end of the 3rd quarter of 2017. 72% of the buyers and about half of the sellers came from outside Germany. “The “Sony Center”, the “Springer new build”, the “Axel-Springer-Passage” and the “Zalando headquarters” were all bought by international investors,” reports Denk. Due to the sale of the “Sony Center”, pension funds were the dominant buyers and sellers, accounting for 35% of buyers (€2.08bn) and 21% of sellers (€1.25bn). Asset/portfolio managers were similarly active as buyers with a share of 21% (€1.23bn); open-end/specialist funds trailed some way behind with 10% of the total (€618m). In their roles as sellers, project developers/builders (€1.10bn) and owner-occupiers/non-properties (€1.06bn) each accounted for 18% of the volume of real estate sold.
Outlook
“Unless there is a major change in the economic and political environment in the fourth quarter, it would seem that a total transaction volume of some 7.00 billion euros is within reach. This would take the capital city close to the record set in 2015, when commercial properties valued at a total of 7.80 billion euros were traded in Berlin,” forecasts Michaelis. 5,467signs excluding main headlines
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About Grossmann & Berger
Grossmann & Berger GmbH is one of the leading real estate service companies for the sale and lease of commercial and residential real estate in Northern Germany. With ten offices in Hamburg and further ones in Berlin, Ahrensburg, Lüneburg and on the island of Sylt the company is present throughout the Northern German market. Thanks to more than 80 years of experience, the company disposes of an extensive real estate competence. Grossmann & Berger is a subsidiary of the HASPA-Group and founder member of the nationwide commercial real estate network German Property Partners (GPP).[
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