Investment market Berlin 4Q2021: Strongest-ever 4th quarter leads to superb result
BERLIN / 11.01.2022
At the end 2021 the market for investment in commercial properties in Berlin rallied to a degree never seen before. Posting a 4th-quarter transaction volume of €4.1bn, Germany’s capital returned the highest-ever trading total for a single quarter. Accordingly, the total volume of transactions in 2021 totalled €10.5bn, second only to the record set in the year 2019. A very weak start to the year was already evened out by the “Fürst” transaction in the 2nd quarter; subsequently a large number of other big-ticket trades contributed to this superb result. “The bottom line, however, is that this result is not due to the large number of transactions with high price-tags, but to the increase in capital values based on high rental rates and price to earnings ratios. 31 transactions were completed in the price category of €100m or more, generating a total turnover of €6.6bn,” says Holger Michaelis, managing director of Grossmann & Berger, a member of German Property Partners (GPP). In view of the exceptionally high volume of trading in 2021, Grossmann & Berger expects the result in 2022 to be somewhat lower, at an estimated €9bn.
- With no sign of the pandemic abating, investors continued to prefer safe asset classes such as offices (56 %) and mixed used real estate (28 %), avoiding hotels and shops.
- The high volume of trading in properties costing over €100m was reflected in the fact that this price category comprised 68 % of the total market in 2021.
- Thanks to the 2nd-quarter “Fürst” transaction, fund managers accounted for 22 % of the market, closing the year as major buyer group. Next in line were private equity funds/opportunity funds and developers who took 15 % of the total volume each.
- The biggest vendor groups were developers (28 %) followed by non-listed property companies (15 %).
- Investor interest continued to focus on office properties let long-term, preferably to public-sector tenants. Properties could command price to annual rental income ratios of up to 38.5, squeezing the prime yield to 2.6 % by the end of 2021. Prime yields on industrial and logistics real estate slipped appreciably, dropping 0.4 percentage points year on year to 3.4 %. The prime yield on commercial buildings also slipped a little to 2.75 %.
- Slightly more international buying activity was noted compared with the previous year; these actors’ share of total trading rose to 58 %, still a low figure for the national capital.