Investment market Hamburg 2Q2023: Price discovery phase delaying market revival

Investment transactions in commercial real estate in Hamburg totalled some €520m by the end of the 1st half of 2023. This translates into a 79 % drop compared with the record figure seen in the same period of 2022, which did, however, owe much to Brookfield Properties’ take-over of alstria. Overall, a third fewer transactions were noted than in the prior year, and the vast majority of real estate traded was in the small to mid-size category. Compared with the 1st quarter of the year the transaction volume has roughly trebled, even though the total is still well below the ten-year average of €1.6bn.

“Trading is still impacted by general uncertainty in the face of the current challenging economic environment. Institutional investors are especially prone to hold back due to rising interest rates. Buyers who are not obliged to borrow are benefiting from the situation,” says Frank-D. Albers, managing director of Grossmann & Berger, member of German Property Partners (GPP). For the 2nd half of the year Albers predicts that, “We are expecting to see rather more people entering into talks about buying as the year progresses. The market seems to have recovered from its state of shock induced by multiple crises and is beginning to accept that the environment has changed. Despite that, the price discovery phase is not over because further interest rate hikes are expected and it is likely that the market will not actually revive until next year at the earliest.”

Investment market Hamburg in detail:  

• Big-ticket transactions remained rare in the 2nd quarter too. The largest transaction, and the sole property traded for more than €100m, was the purchase of the treasury building at Gänsemarkt by the City of Hamburg. Accordingly, the largest share of total trading, at 26 %, was made up of transactions in the €52m to €100m price category.
• Offices were by far the most sought-after class of asset and accounted for 67 % of the total traded. Nevertheless, the volume of office buildings traded was below the prior year’s level of 80 %. Retail properties followed in second place with 18 %.
• A large proportion of transactions (40 %) related to properties in the City sub-market, followed by Bahrenfeld (20 %).
• Due to the large-volume purchase made by the City of Hamburg, public authorities featured as the major group of buyers, accounting for 50 % of the transaction volume.  Private players took advantage of the institutional investors’ restraint, although their interest was primarily in the small to mid-range price segment. They took a 16 % share of the total volume of transactions. However, these two buyer groups each purchased almost the same number of properties in the 2nd quarter.
• The biggest group of vendors was composed of private investors, who took 27 % of the transaction total. Property investment AGs/REITs formed the next largest group with 24 % of the market.
• International investors were behind 16 % of the transaction volume. They were thus a little less hesitant than in the previous quarter (11 %). 
• Prime yields leapt up on all classes of asset. On offices and commercial properties yields grew by 1.20 percentage points to 3.80 % and 3.90 % respectively, and on industrial and logistics real estate by 0.9 percentage points to 4.20 %. These estimates are, however, based on only a small number of underlying transactions.