Foreign investors ensure dynamic investment market for German commercial real estate

  •  Transaction volume at around €38.6 billion, up 18 percent year on year

  •  49 percent attributable to foreign investors, of which 10 percent from Asia

  •  Office properties remain in strong demand

  •  Investments in logistics properties doubled in the space of a year

  •  Growth also in the transaction volume of retail and hotel properties

  •  Vigorous investment activity ongoing


The brisk investment activity on the German commercial investment market continues unabated. At the end of the first three quarters of 2017 the investment volume stood at around €38.6 billion, reflecting an increase of 18 percent compared with the year-earlier period. This is the conclusion drawn in a current analysis prepared by the integrated commercial real estate services company CBRE.

Dr. Jan Linsin, Head of Research Germany
The German economic engine is running at full throttle, the labor market is bursting with energy, real wages recently increased moderately again, and the leading and sentiment indicators have reached long-term highs. The excellent fundamental data ensures that the German commercial real estate market remains high on international investors’ list of favorites. Consequently, strong demand for real estate investment continues unchecked and has therefore boosted the transaction volume considerably.
Dr. Jan Linsin, Head of Research Germany

Market driven by international investors

The share of international investors has risen from 38 percent to 49 percent, and in the Top 5 locations is even as high as 55 percent. All in all, international investors have raised their investment volume by €6.5 billion (53 percent) to more than €18.8 billion in the last twelve months. German investors’ investment volume in the domestic market declined slightly by three percent to just under €20 billion.

Fabian Klein, Head of Investment Germany
Above all, foreign investors are the ones driving the significant growth in the transaction volume on the German investment market. Particularly with very large-scale transactions, international investors often win the bids. Of the 20 largest transactions in the past nine months, which were largely negotiated via bidding procedures, 15 of them were brought over the finishing line by foreign institutional investors, five of whom were investors from Asia and four from North America.

Germany enjoys an excellent reputation throughout the world as an investment location, and the domestic real estate market is considered a stronghold of stability and security in times of geopolitical uncertainties.
Fabian Klein, Head of Investment Germany

The largest transaction in the third quarter was the acquisition of the Sony Center in Berlin for €1.1 billion by Oxford Properties, the investment arm of the pension fund for municipal employees in Ontario (Canada), together with investment company Madison International Realty of the South Korean pension fund NPS at the end of September. CBRE acted in an advisory capacity for Oxford Properties and Madison. Other large-scale transactions included the takeover of a hotel portfolio formerly held by Apollo Global Management by Invesco Real Estate, which was advised by CBRE, and the sale of Axel Springer real estate in Berlin. The new building was sold to the Norwegian sovereign wealth fund Norges, while Blackstone Real Estate Partners Europe V and Quincap Investment Partners acquired the Axel-Springer-Passage, which opened in 2004 with some 46,000 sq m of office space and retail space of around 7,000 sq m. CBRE also advised the two buyers in the latter transaction

Spotlight on large deals and top locations

The first three quarters of 2017 saw a total of 78 deals with a transaction volume of at least €100 million respectively. All in all, the volume in this segment came in at around €18.5 billion. Of these transactions, 45 were concluded by foreign investors in an aggregate volume of just under €13 billion.

Investors are once again focusing more on top locations. The seven large investment centers, including Cologne and Stuttgart, accounted for half the entire transaction volume in the first three quarters. Investment activity focused above all on office properties and hotels in these locations. The very good performance of the real estate markets is a strong argument for investing in these asset classes. Accordingly, take-up of office space in the Top 5 locations had increased to around 2.5 million sq m on a cumulative basis by the end of the quarter, up a good seven percent in a year on-year comparison. Significant increases in prime rents are partly reported, with average rents rising as well, even in the double-digit range in Berlin and Frankfurt.

Berlin, Munich, Düsseldorf and Frankfurt therefore partly saw a significant increase in transaction volumes. “The year-earlier figure was exceeded by as much as 66 percent in Berlin. A figure of €5.57 billion represents the third highest result ever in the German capital, and this after only nine months,” Linsin says. In Hamburg, by contrast, the aggregated transaction volume entered into decline in comparison with the previous year’s period due to the property shortage in the core segment. A well-filled pipeline could, however, ensure that the full-year result significantly outstrips the ten-year average.

In addition, numerous portfolio sales in the logistics and retail segment is indicative of the heightened interest of domestic and international investors in Germany as a location which, thanks to its federal structure, boasts a broad-based economic structure as well as offering many attractive investment locations. All in all, the share of portfolio transactions in the commercial property market climbed by just under four percentage points to around 32 percent.

Investment transaction volumes in Germany (commercial real estate; quarterly figures)












Source: CBRE Research, Q3 2017.

Top 5 investment markets (commercial real estate)









Source: CBRE Research, Q3 2017.

Office properties remain the strongest asset class – record take-up of logistics properties

As in the year-earlier period, a major part of almost €19 billion or 49 percent in the overall investment volume was accounted for by office real estate, representing an increase of 27 percent or just under €4 billion. This asset class will continue to remain very attractive to investors in the future as well due to the sustained positive trends in the office rental markets as well as the forecast for another increase in the number of white collar workers. The Top 5 locations alone accounted for €13 billion, which is two thirds of the entire transaction volume in this asset class.

Among other reasons, due to several large-scale portfolio deals in retail warehouses, neighborhood centers and discount stores/supermarkets, retail properties took second place with a share of 23 percent, followed by the high-growth warehouse/logistics asset class with 15 percent, which was also boosted by a number of large-scale portfolio sales. Investments of €5.8 billion channeled into logistics properties have set a new record for take-up in this asset class. The hotel asset class came in at 7.5 percent, thus further cementing its position as an established asset class.

Institutional investors ramp up their exposure to Germany

The strongest buyer groups in the German commercial investment market were constituted by asset and fund managers (including sovereign wealth funds) with a share of 34 percent, along with open-ended real estate funds and special funds at 19 percent. The latter were more active during the same period in 2016, but after the ongoing process of portfolio streamlining, they are still the strongest net buyer group with €4.7 billion, followed by insurance companies and pension funds with a share of a good 10 percent in the overall transaction volume.

Pressure to invest causes ongoing yield compression

Net initial yields remain under pressure from the sustained strong demand for German commercial property. The average prime yield for first rate office property in the top locations of investment centers has dropped to 3.21 percent in the wake of the new historical lows reached above all in CBD locations in Berlin, Düsseldorf and Frankfurt. Prime rents for office properties still remained stable in Munich and Hamburg, though the strategy of investors of looking for alternatives in preferred city fringe locations is causing ongoing yield compression here. Prime yields for premium high street retail property in the top locations also slipped and currently averages at 3.24 in the top locations. While the prime yield remained stable at 4.00 percent in the shopping center segment, the net initial yield for retail warehouses declined 0.25 percentage points to 4.75 percent compared with the previous quarter. In the case of prime logistics properties, strong demand caused prime yields to drop to currently 4.50 percent, down a quarter of a percentage point from mid-year 2017. Yields continued to fall in the hotel sector as well and currently stand at 4.00 percent, down from 4.25 percent at the end of June this year.

Forecast: full year significantly above the 50 billion euro mark thanks to strong year-end momentum

“As in previous years, the 50 billion euro mark is likely to have been significantly exceeded by the end of the year. The pipeline is well filled and there appears to be no end to the investment momentum on the German commercial property market,” Linsin says.

“A number of prominent trophy buildings and numerous portfolios are currently in the marketing phase and attracting the interest of both domestic and international investors,” Klein adds. “Yield compression, above all in the core segment, combined with the very upbeat economic trend and the resulting growing user demand for commercial property, are causing many investors to expand their risk profile. Properties with appreciation potential outside the top locations, and increasingly also in alternative real estate segments, are becoming more important. However, a convincing concept for a property ultimately remains a decisive factor for investing,” Klein states.

“Investor demand can be expected to run at a continued high level in this country in 2018 as well. Despite the most recent increase, interest rates remain low so that, in comparison to other investment alternatives, property should generate a relatively attractive return. As before, the decision on allocation, particularly in the case of institutional investors who rely on a secure, long-term cash flow, is often likely to be made in favor of property. Germany is considered a safe haven which the new German government will reinforce further,” Linsin comments.

Yield spread office real estate vs 10Y government bonds 











Source: Bundesbank, CBRE Research, Q3 2017.























Source: CBRE Research, Q3 2017.



Fabian Klein
Head of Investment Germany
+49 (0)211 86 06 61 33

Dr. Jan Linsin
CBRE GmbHHead of Research Germany
+49 (0)69 17 00 77 663


About CBRE

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide.

CBRE offers a broad range of integrated services for the entire lifecycle of a property, from strategic and technical advice such as in sales and acquisitions or renting and letting, to managing and valuing properties to portfolio, transaction, project and facility management. CBRE offers individual advice for all asset classes from a single source.

Since 1973, CBRE Germany has been represented by its head office in Frankfurt am Main; there are further branch offices in Berlin, Düsseldorf, Essen, Hamburg, Cologne, Munich, Nuremberg and Stuttgart.