Following a strong start to the year, the market for investment in commercial properties in Berlin slowed in the 2nd quarter of 2022. In the first half of 2022 the transaction volume totalled €4.1bn for a slight year on year decline of 5 %. “Due to the increased costs of borrowing, investors are tending to hold back. Many ongoing negotiations have slowed or been postponed to the second half of the year,” says Holger Michaelis, managing director of Grossmann & Berger, a member of German Property Partners (GPP). The volume of transactions totalled €1.8bn in the 2nd quarter alone, a figure higher than the ten-year average (€1.7bn) but most of this total stemmed from the investment made by the Norwegian Pension Fund in May, which took a large stake in the “Sony Center”. This portfolio transaction accounted for €677m. Looking ahead to the 2nd half year, Michaelis forecasts that, “There is still demand for investment properties. The most important factor to generate more transactions would be good news regarding volatile interest rates and the tense geopolitical environment, so that investors could plan their future spend with more certainty.”
Investment market Berlin details:
- In the first half year a large proportion, 61 %, of transactions fell into the price category of €100m or more. This price category owed much of its leading position in the 2nd quarter to the trading of shares in the “Sony Center” and the sale of the “Wriezener Karree” commercial land.
- Portfolio sales accounted for 33 % of the volume traded (Q2 2021: 12 %). Apart from the “Sony Center” such trades included the 1st-quarter take-over of alstria office by Brookfield Properties.
- Once again, office properties were by far the most sought-after class of assets, taking 66 % of the market (Q2 2021: 35 %). Second and third places went to hotels (10 %) and mixed-use properties (8 %).
- Listed real estate investment AGs/REITs were the predominant vendors, accounting for 22 % of the volume sold, followed by pension funds (18 %) and developers (13 %).
- Major groups of buyers consisted of fund managers (25 %), developers (15 %) and pension funds/professionals’ pension schemes (14 %). The unusually high share taken by the latter group is a result of the “Sony Center” trade.
- Once again, international buyers were very active on the market, accounting for 71 % of investment in Berlin real estate (Q2 2021: 60 %).
- The prime yield on offices (2.85 %) and commercial buildings (3.0 %) inched up year on year by 0.15 and 0.2 percentage points respectively, while the prime yield on logistics properties sank by 0.6 percentage points to 3.2 %. During the course of the year yields on all assets are expected to rise due to higher interest rates.
An overview of the top deals and all relevant market figures can be found in the press release for download.
The market survey Investment Berlin 2022/Q2 will be available for download on our website shortly.