Market in Minutes Germany investment markets Q3 2014
Savills World Research Germany Market in Minutes Germany investment markets Q3 2014 The facts at a glance Residential and commercial property investors look to regional markets ■The transaction volume in the commercial property market for the first three quarters totalled €25.4bn, representing an increase of 31% compared to the same period last year. ■Investments in the residential portfolio market totalled approx. €9.07bn, equating to an increase of 4% year on year. In contrast with the commercial sector, residential investment has lost momentum over the course of the year. ■In both the residential and commercial sectors, activity is increasingly shifting to cities and regions outside of the top locations. With the exception of Berlin, A cities have played almost no part in the residential portfolio market during the year to date. In the commercial property market, the transaction volume outside of the A cities has risen by 51% year on year; significantly more than in the A cities themselves, where investment has risen by just 13%. ■While the extreme core focus of recent years is no longer evident, price sensitivity in the non-core segment remains high. Consequently, initial yields on non-core properties, as well as those in the prime segment, have tightened only moderately. ■While the fourth quarter in the commercial sector is likely to see extremely high levels of investment, the transaction volume in the residential portfolio market is expected to remain at the level of the two previous quarters (approx. €2bn). savills.de/research 01 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Germany Q1-Q3 2014 TabLE 1 Key investment market figures Transaction volume (€m) Dominating sector Share of domestic investors Office prime net initial yield High street prime net initial yield Q3 2014 y-o-y change Sector Share Q3 2014 Q3 2013 Q3 2014 y-o-y change Q3 2014 y-o-y change Berlin 2,498 +12% Office 51% 29% -52% 4.5% -20bps. 4.2% -30bps. Düsseldorf 1,384 +18% Office 63% 62% -19% 4.5% -30bps. 4.0% -20bps. Frankfurt 1,905 -19% Office 65% 59% -19% 4.4% +/-0bps. 3.7% +/-0bps. Hamburg 2,021 +32% Office 57% 47% -9% 4.4% -10bps. 4.3% -10bps. Cologne 559 +54% Office 60% 55% 11% 4.8% -10bps. 4.4% +/-0bps. Munich 2,800 +24% Office 62% 53% 39% 4.2% +/-0bps. 3.5% +/-0bps. Germany* 25,386 +31% Office 42% 46% -21% 4.5% -12bps. 4.0% -10bps. Source: Savills / * prime yields = Ø top six GRAPH 1 GRAPH 2 Transaction volume Transaction volume by sector Rolling transaction volume of past 12 months 14 35 12 30 10 25 2009 Q4 2010 Q2 2010 Q4 Source: Savills / * forecast 2011 Q2 2011 Q4 2012 Q2 2012 Q4 2013 Q2 2013 Q4 7.83 7.18 10.37 5.93 11.88 6.38 6.94 5.25 10.97 4.07 5.33 0 6.69 5 6.30 2 5.25 10 5.59 4 6.53 15 3.63 6 2.82 20 4.97 8 3.73 €bn 40 Development land 3% Other 8% Hotel / Gastronomy 9% Office 42% €bn Transaction volume 16 Industrial / Logistics 11% - Retail 27% 2014 2014* Q2 Source: Savills German commercial investment market in minutes Significant increase in investment across all market sectors • The transaction volume for the first three quarters totalled €25.4bn, representing an increase of 31% compared to the same period last year. • Investment levels rose significantly both in the top six locations (+13% to approx. €11.2bn) and outside of these major cities (+51% to €14.2bn). All sectors, with the exception of development sites, registered an increase in investment activity, with hotels (+104%) and logistics/industrial property (+88%) enjoying the largest rises. • While the extreme core focus of recent years is no longer evident and value-add property is in particularly high demand, price sensitivity in the non-core segment remains high. Disadvantages in terms of location are producing the largest price discounts while lease terms have long since ceased to carry the same weight that they did in the years immediately following the financial crisis. savills.de/research 02 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Germany Q1-Q3 2014 GRAPH 3 GRAPH 4 Transaction volume by location Transaction volume by type of investor Purchases Munich 12% Sales Net investments Private-equity fund Insurance company / Pension fund Open-ended special fund Berlin 10% Listed property company Corporate Sovereign wealth fund Other Closed-ended fund Housing association Hamburg 8% Other 55% Other Asset Manager Public administration Open-ended public fund Private investor / Family office Frankfurt 8% Bank Developer Düsseldorf Cologne 5% -5,250 -3,500 -1,750 2% Source: Savills Source: Savills GRAPH 5 GRAPH 6 Transaction volume by origin of buyer Prime yields €m 1,750 Office 3,500 5,250 Prime High Street 7 Other 22% 6 5 4 % Germany 46% Canada 2% 3 France 7% 2 1 UK 10% 0 USA 13% 2005 Source: Savills 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q3 Source: Savills TabLE 2 The largest transactions in Q1-Q3 2014 at a glance* Property / Portfolio Type of use Location(s) Volume Buyer Vendor Leo 1 portfolio Office Hesse approx. €1,000m Patrizia Commerz Real Accor portfolio Hotel Germany + Netherlands approx. €720m Accor Moor Park Centro (50% share) Retail Oberhausen approx. €540m Unibail-Rodamco Stadium Group Christie portfolio Retail East Germany approx. €400m Morgan Stanley, Redos Prudential et al. Portigon ensemble Office Düsseldorf approx. €350m Blackstone Portigon Source: Savills / * only published transactions are shown savills.de/research 03 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Berlin Q1-Q3 2014 GRAPH 7 GRAPH 8 Transaction volume Transaction volume by sector Transaction volume Average of past five years Other 13% 3,000 Development land 2% 2,500 Hotel / Gastronomy 8% €m 2,000 1,500 Office 51% 1,000 2009 Q4 2010 Q2 2010 Q4 2011 Q2 2011 Q4 2012 Q2 2012 Q4 2013 Q2 2013 Q4 Retail 26% 1,219 656 623 1,253 812 768 645 2,618 605 528 613 1,171 617 498 692 509 394 680 738 0 358 500 2014 Q2 Source: Savills / * forecast Source: Savills GRAPH 9 GRAPH 10 Transaction volume by origin of buyer Transaction volume by type of investor Purchases Sales Net investments Private investor / Family office Other 28% Germany 29% Open-ended special fund Private-equity fund Corporate Other Open-ended public fund Listed property company Sovereign wealth fund Housing association Public administration Developer Closed-ended fund UK 6% Bank Insurance company / Pension fund France 6% Asia / Pacific 8% Other Asset Manager USA 23% Source: Savills -400 -300 -200 -100 €m 100 200 300 400 Source: Savills Berlin market in minutes Locations outside the suburban rail ring are increasingly in demand • Almost €2.5bn was invested in commercial property in Berlin in the first nine months of the current year; an increase of 12% compared with the corresponding period last year. • There is now demand across all risk categories, with the majority of investors maintaining a strong focus on core properties as well as properties in good B locations. A number of transactions were completed in such B locations in the third quarter, including the acquisition by TLG of a property let to Verdi and Deutsche Bahn at the Ostbahnhof station. • Private investors and family offices remain the most active purchasers in the central locations. However, in addition to B locations, peripheral locations have also increasingly attracted investors’ attention. The axis towards Schönefeld / BER Airport has particularly come under the spotlight while other locations outside of the suburban rail ring are also being searched by investors for investment opportunities. savills.de/research 04 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Düsseldorf Q1-Q3 2014 GRAPH 11 GRAPH 12 Transaction volume Transaction volume by sector Transaction volume Hotel / Gastronomy 3% Average of past five years 900 Other 1% 800 700 €m 600 Retail 33% 500 400 300 2010 Q2 2010 Q4 2011 Q2 2011 Q4 2012 Q2 2012 Q4 2013 Q2 2013 Q4 187 690 507 824 172 358 648 282 Office 63% 186 115 479 346 95 195 586 256 94 2009 Q4 242 0 495 100 37 200 2014 Q2 Source: Savills / * forecast Source: Savills GRAPH 13 GRAPH 14 Transaction volume by origin of buyer Transaction volume by type of investor Other 2% Purchases Sales Net investments Insurance company / Pension fund Private-equity fund Open-ended special fund Closed-ended fund USA 30% Private investor / Family office Listed property company Other Housing association Sovereign wealth fund Bank Open-ended public fund Other Asset Manager Public administration Germany 68% Developer Corporate -400 -300 -200 -100 Source: Savills €m 100 200 300 400 Source: Savills Düsseldorf market in minutes High levels of activity across all risk categories • In Düsseldorf, property changed hands in transactions totalling €1.38bn during the first three quarters of the year, representing an 18% rise in the transaction volume year on year. • Moreover, the extraordinarily high transaction volume is very broadly based. While activity is largely focused within the office and retail sectors (transactions totalling approx. €870m and approx. €450m respectively), this is distributed across many locations and risk categories. • Investments during the year to date have included both traditional core properties (e.g. Metro headquarters and Kö-Galerie) and value-add assets (e.g. La Vie). However, there is also much activity in the opportunistic segment: A particular area of focus has been the Seestern office district, where even completely vacant office properties have been finding buyers with plans for refurbishment or conversion to residential accommodation. savills.de/research 05 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Frankfurt Q1-Q3 2014 GRAPH 15 GRAPH 16 Transaction volume Transaction volume by sector Transaction volume Other 8% Average of past five years 1,800 Development land 1% 1,600 1,400 1,200 Hotel / Gastronomy 25% €m 1,000 800 600 2009 Q4 2010 Q2 2010 Q4 2011 Q2 2011 Q4 2012 Q2 2012 Q4 2013 Q2 2013 Q4 840 358 Office 66% 707 1,136 560 923 858 1,615 116 704 433 514 928 278 727 441 186 161 0 344 200 357 400 2014 Q2 Source: Savills / * forecast Source: Savills GRAPH 17 GRAPH 18 Transaction volume by origin of buyer Transaction volume by type of investor Purchases Other 12% Sales Net investments Insurance company / Pension fund Sovereign wealth fund USA 6% Private-equity fund Closed-ended fund Other Asset Manager Developer UK 6% Housing association Other Corporate Public administration Switzerland 8% Germany 59% Open-ended special fund Listed property company Open-ended public fund Bank Quatar 9% Source: Savills Private investor / Family office -500 -375 -250 -125 €m 125 250 375 500 Source: Savills Frankfurt market in minutes Major deals in Q4 could mean positive investment growth • More than €1.9bn was invested in commercial property in Frankfurt in the first three quarters of the current year. This represents a 19% decrease in the transaction volume year on year. • The sale of the Messeturm was by far the largest transaction ahead of a number of deals in excess of €100m. With several additional major transactions due for completion in the fourth quarter, the shortfall in investment could well be converted into an increase by the end of the year. • Faced with a shortage of core properties, some investors are adapting their search profile and becoming bolder. This is particularly demonstrated by a growing amount of due diligence being conducted on peripheral locations, such as Niederrad or the Osthafen. Niederrad in particular is now a highly vibrant submarket. Four properties have already changed hands in the former offices-only district during the year to date. savills.de/research 06 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Hamburg Q1-Q3 2014 GRAPH 19 GRAPH 20 Transaction volume Transaction volume by sector Transaction volume Development land Hotel / 1% Gastronomy 3% Average of past five years 1,400 1,200 Industrial / Logistics 6% 1,000 €m Other 8% 800 600 Office 57% 400 2009 Q4 2010 Q2 2010 Q4 2011 Q2 2011 Q4 2012 Q2 2012 Q4 2013 Q2 2013 Q4 746 701 574 473 580 475 631 404 192 434 393 500 617 567 930 173 291 545 0 84 200 1,315 Retail 25% 2014 Q2 Source: Savills / * forecast Source: Savills GRAPH 21 GRAPH 22 Transaction volume by origin of buyer Transaction volume by type of investor Purchases Other 15% Sales Net investments Open-ended special fund Other Asset Manager Private-equity fund UK 4% Closed-ended fund Insurance company / Pension fund Housing association Austria 6% Other Germany 47% Sovereign wealth fund Bank Private investor / Family office Public administration Listed property company Sweden 10% Corporate Open-ended public fund Developer USA 18% Source: Savills -400 -300 -200 -100 €m 100 200 300 400 Source: Savills Hamburg market in minutes St. Pauli was the most active submarket in the third quarter • Investment in the Hamburg commercial property market totalled just over €2.0bn in the first three quarters of the current year; almost a third more than in the corresponding period last year. • The two largest transactions in the third quarter are a good reflection of the overall situation in the Hamburg investment market. These involved Atlantic Haus and the ‘Tanzende Türme’ in St. Pauli; both high-quality properties in good B locations. Such B locations close to the city centre are currently accounting for the highest levels of activity. • Besides St. Pauli, HafenCity has also been a particular focus during the year to date while a number of transactions have been completed in the Langenhorn district close to the airport. Further deals are expected to be completed in these submarkets in the fourth quarter while a number of transactions are also in progress in the City North submarket. savills.de/research 07 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Cologne Q1-Q3 2014 GRAPH 23 GRAPH 24 Transaction volume Transaction volume by sector Transaction volume Average of past five years 600 Development land 6% 500 €m 400 Industrial / Logistics 4% Other 6% Hotel / Gastronomy 9% 300 200 2009 Q4 2010 Q2 2010 Q4 2011 Q2 2011 Q4 2012 Q4 2013 Q2 2013 Q4 171 104 284 26 488 85 253 174 26 2012 Q2 257 148 131 282 202 111 80 183 257 273 260 0 Office 60% Retail 15% 100 2014 Q2 Source: Savills / * forecast Source: Savills GRAPH 25 GRAPH 26 Transaction volume by origin of buyer Australia 5% Transaction volume by type of investor Switzerland 4% Purchases Sales Net investments Private investor / Family office Open-ended public fund Private-equity fund Other Asset Manager Public administration Other Housing association Sovereign wealth fund North America 32% Corporate Open-ended special fund Closed-ended fund Germany 59% Bank Developer Listed property company Insurance company / Pension fund -100 Source: Savills -50 €m 50 100 Source: Savills Cologne market in minutes Cologne increasingly on investors’ radar • Some €560m was invested in Cologne’s commercial property market in the first three quarters of 2014; 54% more than in the corresponding period last year. • Cologne is benefiting from the fact that initial yields are still relatively high despite favourable conditions in the letting markets, meaning that certain investors who were previously only active in the other top German markets are now also looking at Cologne. Foreign investors are also increasingly active in the cathedral city. • Large, high value properties are particularly in demand, although investment opportunities in this category remain scarce. The properties currently available in the market are often of a value-add character. However, demand for these is also high since the situation in the letting markets is conducive to the implementation of value-add strategies. savills.de/research 08 Market in Minutes | Germany Investment Markets Q3 2014 Commercial investment market Munich Q1-Q3 2014 GRAPH 27 GRAPH 28 Transaction volume Transaction volume by sector Transaction volume Average of past five years 2,500 2,250 2,000 Industrial / Logistics Development 1% land 2% Hotel / Gastronomy 12% Other 5% €m 1,750 1,500 1,250 1,000 Retail 19% 750 Office 61% 2009 Q4 2010 Q4 2011 Q2 2011 Q4 2012 Q2 2012 Q4 2013 Q2 2013 Q4 1,320 568 1,112 2,200 860 563 827 1,141 549 710 361 860 653 452 207 183 2010 Q2 294 0 91 152 250 504 500 2014 Q2 Source: Savills / * forecast Source: Savills GRAPH 29 GRAPH 30 Transaction volume by origin of buyer Transaction volume by type of investor Purchases Other 19% Sales Net investments Open-ended special fund Private-equity fund Insurance company / Pension fund Corporate Open-ended public fund Other USA 5% Private investor / Family office Housing association Sovereign wealth fund Germany 53% Ireland 7% Public administration Bank Other Asset Manager Listed property company Developer Norway 7% Closed-ended fund UK 9% Source: Savills -600 -400 -200 €m 200 400 600 Source: Savills Munich market in minutes Brisk investment activity despite high prices • More than €1.3bn was invested in Munich’s commercial property market between July and September making the third quarter the most successful of the year to date in terms of investment activity. The transaction volume for the first three quarters of 2014 stands at approx. €3bn, representing an increase of 33% compared to the corresponding period last year. • Despite the very low net initial yields in the prime segment (3.5% on high-street properties, 4.2% on offices), the investment pressure once again resulted in a number of transactions being completed. However, investors are also increasingly shifting their attention to locations outside of the CBD. • Two properties in the Arnulfpark district changed hands in the third quarter in Munich’s central bus station and the Kontorhaus, while less central locations, such as Ramersdorf-Perlach, also registered a number of transactions during the same period. savills.de/research 09 Market in Minutes | Germany Investment Markets Q3 2014 Residential portfolio investment market Germany Q1-Q3 2014 GRAPH 31 GRAPH 32 Transaction volume Size of portfolios transacted 100 < 800 units < 5,000 units 10,000+ units Number of deals 18,000 180 16,000 160 14,000 140 12,000 10,000 100% 4,000 120 70% 3,500 100 60% 3,000 50% 2,500 40% 2,000 30% 1,500 20% 1,000 10% 500 €m 4,500 80% 80 6,000 60 4,000 40 2,000 20 0 2007 2008 2009 2010 2011 2012 2013 2014 Q3 0% 0 2007 2008 2009 2010 2011 2012 2013 Source: Savills / * portfolios with at least 100 units each Source: Savills GRAPH 33 GRAPH 34 Transacted units by location Transacted units by type of city* Berlin 13% 2014 Q3 A 16% Kiel 9% Other 36% Bremen 6% Other 66% B 18% Mönchengladbach 5% Dresden 3% C 22% D 8% Source: Savills 5,000 90% 8,000 0 800 < 2,000 units < 10,000 units Units per transaction Number of Units Transaction volume and number of deals* Source: Savills / * based on the Bulwiengesa classification German residential portfolio market in minutes Regional markets increasingly important - Berlin still in the spotlight • The German market for residential portfolios recorded a transaction volume of approx. €2.09bn in the third quarter of 2014; a moderate increase compared to the previous quarter (approx. €1.85bn). Investment from January to September 2014 totalled €9.07bn, representing a 4% increase compared to the corresponding period last year. • With the exception of Berlin (the most active city with almost 22,000 units transacted), the A cities are now practically insignificant in terms of the overall market. Particularly in the highly expensive cities, such as Hamburg (approx. 1,000 units, 27th place) and Munich (approx. 460 units, 38th place), few residential portfolios have changed hands this year. • The scarce supply of large residential portfolios remains a primary limiting factor for the transaction volume. Overall, there were just five transactions in excess of €100m in the third quarter. savills.de/research 10 Market in Minutes | Germany Investment Markets Q3 2014 Residential portfolio investment market Germany Q1-Q3 2014 GRAPH 35 GRAPH 36 Transaction volume by origin of buyer Luxembourg 3% Transaction volume by origin of seller Other 7% Other 20% Austria 12% Germany 43% Italy 8% Germany 78% USA 29% Source: Savills Source: Savills GRAPH 37 GRAPH 38 Transaction volume by type of investor Development of prices* Purchases Sales Net investments Average price per unit 70,000 Listed property company Housing association 60,000 Open-ended special fund Open-ended public fund 50,000 Other Closed-ended fund €/sq m Corporate Insurance company / Pension fund Sovereign wealth fund Bank Public administration 40,000 30,000 20,000 Private investor / Family office Developer Other asset manager 10,000 Private-equity fund -6,000 -4,000 -2,000 €m 2,000 4,000 6,000 0 2007 Source: Savills 2008 2009 2010 2011 2012 2013 2014 Q3 Source: Savills / * for portfolios with at least 100 units each TabLE 3 The largest residential portfolio transactions in Q1-Q3 2014 at a glance* Portfolio Number of units Volume* Buyer Vendor Vitus ca. 30,000 €1,400m Deutsche Annington Vitus Dewag ca. 11,500 €970m Deutsche Annington Equity Residential, AvalonBay Communities DGAG ca. 18,000 €892m Buwog / Immofinanz Prelios, Deutsche Asset & Wealth Management - ca. 13,300 Undisclosed Westgrund berlinovo - ca. 8,200 Undisclosed Adler Real Estate Corestate Source: Savills / * only published transactions are shown savills.de/research 11 Market in Minutes | Germany Investment Markets Q3 2014 Savills Germany Savills is present in Germany with around 160 employees with six offices in the most important estate sites Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne and Munich. Today Savills provides expertise and market transparency to its clients in the following areas of activity: HH B D Our services C »» Purchase and sale of single assets and portfolios »» Corporate Finance - Valuation »» Leasing of office and retail buildings »» Leasing and sale of industrial and warehouse properties »» Corporate Real Estate Services F M www.savills.de Savills Germany Please contact us for further information Marcus Lemli Investment Europe +49 (0) 69 273 000 11 [email protected] Andreas Wende Investment Germany +49 (0) 40 309 977 110 [email protected] Steffen Pulvermacher Investment Berlin +49 (0) 30 726 165 187 [email protected] Stefan Mellies Investment Düsseldorf +49 (0) 211 22 962 221 [email protected] Jürgen Schmid Investment Frankfurt +49 (0) 69 273 000 18 [email protected] Sascha Hanekopf Investment Hamburg +49 (0) 40 309 977 141 [email protected] Dr. Frank Urfer Investment Munich +49 (0) 89 427 292 211 [email protected] Karsten Nemecek Corp. Finance - Valuation +49 (0) 30 726 165 138 [email protected] Matthias Pink Research +49 (0) 30 726 165 134 [email protected] Fabian Sperber Research +49 (0) 30 726 165 139 [email protected] Savills is a leading global real estate service provider listed on the London Stock Exchange. The company, established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East with more than 27,000 employees worldwide. Savills is present in Germany with around 160 employees with six offices in the most important estate sites Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne and Munich. This bulletin is for general informative purposes only. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. 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