German office investment market just shy of 2015 record level

  • Large-scale portfolio deals and run on trophy properties determine the office investment market

  • Investment focus mainly on large office centres

  • Strong letting figures and rising prime rents elicit growing international investor interest

Around €24.8 billion was invested in German office real estate over the past year. At 47% of the entire commercial transaction volume, office properties therefore remained the strongest asset class. Compared with the altogether stronger previous year, the investment volume in the office segment declined by a mere 2%. The final quarter of the year alone saw €9.9 billion channelled into office properties, including Blackstone’s €3.3 billion takeover of OfficeFirst Immobilien with, among other properties, The Squaire and Theodor-Stern-Kai in Frankfurt, marking the largest transaction ever in the German commercial property market. This is the conclusion drawn in a current analysis prepared by commercial real estate services company CBRE.

“Germany is viewed by property investors as one of the world’s most in-demand investment markets which, given the heightened global political uncertainty, has as a safe haven become even more popular with institutional investors. Owing to the positive trends in the office letting markets, with a take-up record in 2016, further rising rents and falling vacancy rates, coupled with the very robust German economy, very good labour market data and strong growth in employment in the companies, office properties top the list in terms of investor allocation,” says Jan Linsin, Head of Research at CBRE Germany.

Large-scale transactions in the Top 5 centres predominate

Investments focused especially on the property centres of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich. Approximately 74% of the entire office investment volume was attributable to the Top 5 locations, up 4% compared with 2015. This strong performance was also boosted by several major transactions of landmark properties, including Highlight Towers, BayWa Tower and the NOVE in Munich as well as, for instance, Taunusturm, Commerzbank Tower and The Squaire in Frankfurt, all properties bought by foreign investors.

“All in all, excess demand continues, above all in the investment centres, and most particularly in the core segment. As a result, investors are inclined to greater risk tolerance here in their investment decisions and are increasingly extending their activities towards sustainable investment products in the city fringe as well as in peripheral submarkets of the top locations again,” said Fabian Klein, Head of Investment at CBRE Germany.

Investment turnover in office properties in Cologne and Stuttgart also rose significantly, with considerably more than €1 billion invested in each of these cities. By contrast, a downturn in the investment volume was registered in regional centres and secondary markets, where a year-on-year decline of 26% to €3.9 billion was reported. “Smaller markets, less products and, accordingly, more selective investment decisions,” Linsin summarises. “Greater risk tolerance has not been ascertained here, neither on the part of the investors nor of the financing banks. No compromises are being made in these locations – a realistic analysis at market and property level is making sure of that.”

National and international investors compete for properties

The proportion of office properties traded in the context of portfolios dropped again compared with the previous year, posting only 23% in 2016. Alongside the mega portfolio sale of the OfficeFirst properties, large-scale single asset transactions in particular dominated the market activity. All in all, 40 transactions were registered with a volume of more than €100 million each, 13 of which were portfolio sales. Eighteen of these large transactions were attributable to international investors who invested a good €10.8 billion in total in German office properties, thus achieving a share of almost 44% in the total transaction volume (2015: 46%). “Generally speaking, international investors are on the lookout for large-scale investment opportunities in Germany in particular. Demand from international investors, with a strong focus on the more transparent top locations, continues to run at a high level,” Klein explains. “At the same time, national investors are also expanding their involvement in the German market in view of the political challenges worldwide, with the result that competition for desirable investment property is increasing,” Klein adds.

Ongoing yield compression for prime properties

The strong demand for German commercial property put further pressure on prime yields across all asset classes in the final quarter of 2016 as well. Net initial yields for office properties fell again in the wake of high and steady demand in all top centres. An average prime yield of 3.60% is currently commanded in the Top 5 office markets. A new record low was reached in all the top markets, with Munich delivering the lowest yield of 3.20%, and both Frankfurt and Düsseldorf the highest of 4.00% respectively.

“The growing willingness of investors to invest outside the established CBD locations in the top locations as well is also causing ongoing yield compression in the city fringe and in the peripheral submarkets due to limited product availability. As a result, prime yields here have partly already dropped below 4.50%,” Klein states.

Capital values up 18% year on year

With prime rents rising and yields continuing to fall, capital values across the top locations increased in the double-digit range over the course of the year. At year-end 2016, the weighted CBRE capital value indices rose to a new record figure of 319 points, up 18% compared with year-end 2015. The sub-indices especially in Berlin (up 38%) and Hamburg (up 22%) showed an above-average increase. The square metre price for prime office space in central locations ranges between €13,125 in Munich and €7,950 in Düsseldorf. Frankfurt’s banking district commands €11,850; top prices in Berlin are at a good €9,700, while Hamburg’s CBD notches up €9,176.

Outlook: ongoing strong demand with growing risk tolerance

“In 2017, we anticipate that dynamic investment activity is set to continue, supported by robust economic growth and sound fundamental data,” Linsin says. Continued strong demand, above all for state-of-the art office space that, given the fairly moderate completion figures in recent years and the limited pipeline which could ensure that prime rents continue to rise, will also keep investments in office properties in Germany booming in the new year. “In the face of heightened geopolitical risks, we anticipate a sharp increase in the amount of foreign capital flowing into the German property market and expect yields to continue their moderate decline over the course of 2017, above all in the office investment centres,” Linsin adds.

“In 2017 as well, investor strategies will largely focus on the Top 5 locations. We therefore expect that investors will have a greater risk tolerance here and make more investments including properties requiring more intensive management as well as developments and investments in peripheral locations,” Klein predicts.

Prime rent for office property by sub-market cluster













Source: CBRE Research, Q4 2016

Investment volumes, net initial yields & yields of 10-Y Bunds









Source: CBRE Research, Q4 2016


Fabian Klein
Head of Investment Germany
+49 (0)69 17 00 77 55

Dr. Jan Linsin
Head 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 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at