Investment market Berlin 2Q2023: Isolated large transactions underpin the volume of trade

In the first half of 2023 trading in commercial real estate in Berlin was marked by the small number of agreements, although in isolated cases big-ticket transactions were noted. The volume of transactions totalled some €1.9bn – the highest result among Germany’s top 7 cities. Around €1.2bn of the total was posted in the 2nd quarter. This was largely attributable to several shareholdings sold by Signa: “Galeria Kaufhof at Alexanderplatz in connection with the “MYND” development and “BEAM” on Shicklerstrasse. The volume of transactions fell 54 % below the prior year’s figure which had, however, owed much to Brookfield Properties’ take-over of alstria. 

“In the capital city we observe that investors are still hesitant and the overall result is supported by only a few isolated big-ticket transactions,” comments Frank-D. Albers, managing director of Grossmann & Berger, member of German Property Partners (GPP). “Many buyers have come to terms with the new market environment and are becoming more willing to invest. Sellers, however, remain reluctant to part with properties.” For the remainder of the year Albers forecasts that, “We expect it will be next year at the earliest before the price discovery phase ends and the market revives. However, in the second half of 2023 there should be more options to buy, especially for cash-rich private investors.” 

Investment market Berlin in detail:

• The largest share of total trading, at 74 %, was made up of transactions in the price category of €100m or more. Here too, Signa was involved in much of the trading, buying sizeable shareholdings in the 2nd quarter.
• Accounting for 53 % of the volume traded, office properties were the most sought-after class of assets. Retail properties soared year on year from a market share of 3 % to 36 %, thus placing second behind offices. Latter result is primarily due to the sale of shares in the “KaDeWe” department store and the sale of “Galeria Kaufhof” together with “MYND”.
• Open-ended property mutual funds comprised the most active group of buyers. They accounted for some 53 % of the transaction volume, followed by corporates and owner-occupiers at 20 %. Project developers were the largest group of sellers, accounting for 42% of the volume traded. Listed real estate investment AGs/REITs followed with 19 %. These results were also influenced by the large-scale transactions completed by Signa.
• International investors were behind about 29 % of the total transaction volume. They were thus far more restrained than in the same period a year before (71 %) and in the 1st quarter of 2023 (70 %).
• As a result of interest rate growth prime yields on all classes of asset continued to grow. On offices yields rose by 0.95 percentage points to 3.80 %, and on commercial properties and industrial & logistics real estate they grew by 1.20 and 0.70 percentage points respectively, to 4.20 %. These estimates are, however, based on only a small number of reference cases. Yields may be expected to rise higher due to the anticipated interest rate hikes.