Frankfurt am Main,

German office property market continues to dominate the commercial segment

  • Major part of investments in the top locations, but significant increase in the transaction volume in regional centers and secondary cities
  • Greater presence of international investors on the market again – German office property especially attractive to investors from North America and Asia
  • Renewed decline in net initial yields

Office property remains the focus of investors in Germany’s strong commercial investment market. At just under €19 billion or 49 percent of the overall volume, almost half of the transaction volume was accounted for by office properties, reflecting an increase of 27 percent, which is almost four billion euros more than in the year-earlier period. This is the conclusion drawn in a current analysis prepared by the integrated commercial real estate services company CBRE.

Top locations continue to dominate – sharp increase in investment in regional centers and secondary cities as well

Of the investment volume in office properties, €13 billion or two thirds were attributable solely to the Top 5 locations of Berlin, Düsseldorf, Frankfurt am Main, Hamburg and Munich. 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. Cumulative take-up of office space in the Top 5 locations had increased to around 2.5 million sq m by the end of the quarter, up a good seven percent in a year-on-year comparison. Significant increases in prime rents were partly reported, with average rents rising as well, even in the double-digit percentage range in Berlin and Frankfurt.

Office investment volume by location

Source: CBRE Research, Q3 2017.

Even though the top locations remain in hot demand and attract a major part of investments, there are signs that investors, prompted by the renewed downturn in net initial yields in the investment centers, are increasingly turning to regional centers and secondary cities in their search for attractive investment opportunities. An amount of €4.3 billion, some 62 percent more than in the year-earlier period, was channeled into locations outside the Top 7 locations, much of it in the context of nationwide portfolio transactions. At 30 percent, the share of portfolio deals in the transaction volume clearly exceeded the nationwide figure (15 percent) and that of the Top 5 locations (eight percent). Across Germany as a whole, ten of the 42 deals transacted in the office segment above the €100 million mark, totaling just under €8.5 billion, were attributable to portfolio sales.

Dr. Jan Linsin, Head of Research Germany
At the moment, we are seeing an absolute run on Berlin. About half of the top 20 transactions took place in the capital city alone.
Dr. Jan Linsin, Head of Research Germany

At €1.1 billion, the largest transaction in the third quarter was the acquisition of the Sony Center by Oxford Properties and investment company Madison International Realty from the South Korean pension fund NPS at the end of September, with CBRE advising the buyer. Other large transactions included the sale of the Axel Springer properties to Norwegian sovereign wealth fund Norges and the acquisition of the Axel-Springer-Passage by Blackstone Real Estate Partners Europe V and Quincap Investment Partners. CBRE also advised the two buyers in the latter transaction. “Berlin has clearly won the trust of investors. Many international companies want to settle here. Frankfurt is also gaining ground: of the top 20 transactions, six took place here,” Linsin adds.

Every second investor comes from abroad

International investors invested to an even greater extent in the market than in the previous year’s period. At a good €9.3 billion, almost 50 percent of the volume invested in office properties was funded by foreign buyers. Investors from North American and Asia had an especially strong presence in the market, along with European investors. Foreign buyers accounted for 26 transactions worth almost €6 billion in the segment of over €100 million.

Fabian Klein, Head of Investment Germany
Asian investors invest in Germany with the aim of diversifying their portfolios and are often interested in large, high-profile and especially intrinsically valuable trophy buildings. Institutional investors from North America are increasingly discovering the German market. Particularly large high-equity pension funds are very active here and will continue to compete as investors for scarce core properties in the future as well.
Fabian Klein, Head of Investment Germany

Relentless pressure to invest – yields remain challenged

The sustained strong demand for German commercial property continues to exert pressure on net initial yields. 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. The prime yield for office properties in Munich and Hamburg still remained stable, but the strategy of investors of looking for alternatives in preferred city fringe locations is causing ongoing yield compression. Consequently, the four percent mark for first rate office properties here has also been significantly undercut.

Forecast: run on German office properties set to continue

The German office property investment and letting markets are currently moving concertedly towards new record highs. It can be assumed that demand will stay very strong next year as well.

The fundamental data remain extremely good, the German economy is booming, and more office jobs will be created, above all in the sought-after city center locations where there is currently a shortage of the right kind of property. Consequently, vacancies in a number of inner-city sub-markets in Berlin and Munich are virtually non-existent, which will push up rents at the top end as well as average rents. In this respect, Berlin in particular will continue to close the gap and catch up with Frankfurt and Munich in terms of the achievable prime rent in the medium term.

In addition, some investors are also pricing in their expectations of Brexit and positioning themselves with their funds in Berlin and Frankfurt, the two German cities that are poised to reap the greatest benefit from the political redirection of the British economy.

“The German office real estate market has delivered fresh proof of its strength and has impressively retained its position as the strongest asset class in the commercial segment. Its great attraction for domestic and international players continues unchecked, particularly in times of growing uncertainty when Germany is considered a safe haven. We assume that the lively investment activity will hold steady over the remainder of the year,” Linsin says.

“Many investors are turning to secondary locations due to the dampened prospects of yield in the core segment, a trend which is likely to hold steady over the remainder of the year. In view of the large-scale portfolios already in the pipeline for the second half-year and the sale of trophy buildings, we anticipate a transaction volume in the office segment of significantly more than €25 billion over the full year,” Klein explains.

Prime yield for office properties by sub-market cluster













Source: CBRE Research, Q3 2017.

Investment volumes, net initial yields & yields of 10-Y government bonds










Source: CBRE Research, Q3 2017.



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 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.