German commercial property transactions up 30%, headed by office

Research from property consultancy group NAI apollo shows that transaction volumes in the German office market have increased by 40% to €12bn over the first three quarters of 2014. Figures reaching us from fellow brokers BNP Paribas Real Estate and JLL do deviate somewhat from the NAI apollo figure, but frequently these are a function of definition – what certainly seems to be the case is the office sector has seen the second-highest first three quarters transaction volume ever in Germany, a sign of how strong it has swung back into investors' favour.

Overall the investment market for all categories of commercial property was €25.4bn, up a full 33% on the same period last year. NAI apollos's figure of €12bn for the office sector give the category a share of 47.2% (up 40% on last year), while retail at 26.2% (€6.7bn) remained on a par with last year. Another big winner is logistics real estate (see elsewhere in this issue) which rose 54.6% year-on-year to a volume of €2.7bn and a share of 10.5%, thus exceeding even the previous record year of 2007 for the asset class, when it turned over €2.5bn.

Naturally the high demand in the office sector has led to lowered yields, of about 5 basis points in the case of Berlin (4.6%), Frankfurt (4.6%) and Munich (4.25%). Notable in the NAI apollo figures for office is the hefty increase in portfolio sales volume (up 164%) versus individual sales (up only 20.7%). This was largely due to the €1bn LEO-1 portfolio sale to a Patrizia Immobilien Spezialfonds, and in Q3 the sale of the Orion portfolio to I-REIT Global in Singapore for €225m.

Also notable is the rise of German investors at the expense of foreigners. According to Dr. Konrad Kanzler, head of reasearch at NAI apollo, "A look at the buyers' roster shows a clear dominance of German investors with a share of 61.5% or €7.3bn, up a third on last year, and ahead of US investors at 17.5% or €2.1bn, followed by UK investors at 5.9% and €710m.

NAI apollo says the demand for office assets will continue over the next several months, with investors searching extensively in B-locations and for value-added products. This will see full-year transaction volumes cross the €15.6bn threshold.