Germany's office investment market off to a very strong start to the year

  • 75 percent of the entire office investment volume goes to Top 7 locations

  • At €2.1 billion, investment volume of international players almost doubles in a year-on-year comparison

  • Prime yields decline further – also on city outskirts and peripheral locations

Office real estate remains the uncontestably strongest asset class with 45 percent of the overall volume at the German commercial real estate investment market. With a transaction volume of a good €5.6 billion, the office investment market got off to a very strong start to the year, exceeding the five-year average for a starting quarter by almost 50 percent. Compared to the first quarter of 2016, the investment volume allocated to office real estate soared by 41 percent, which equates to €1.6billion. This is a conclusion of a current analysis prepared by the commercial real estate services company CBRE.

Dr. Jan Linsin, Head of Research Germany
Above all, the office letting markets are reaping the benefits of the very robust economic development: Sustainably high letting take-up, vacancy rates partly below the natural threshold, sustainable rental growth and a very modest property development pipeline ensure a stable foundation and thus secure long-term cash flows. Consequently, investment in office properties continues to be at the top of investors’ agendas.
Dr. Jan Linsin, Head of Research Germany

Large-scale transactions in top locations make significant contribution to the result

The strong quarterly result was boosted mainly by large-scale single transactions. At a mere six percent, the portfolio share in the top seven locations was even below the nationwide figure (11 percent) that had also declined in a year-on-year comparison. Overall, eleven transactions of office properties above the €100 million mark were registered, altogether accounting for around one third of the entire volume. With the exception of one nationwide portfolio, these large-scale transactions took place in Munich, Berlin and Cologne.

For instance, as many as four transactions were recorded in Berlin, each of more than €100 million, including the Cube Berlin that was sold by CA Immo to TH Real Estate. Three transactions over the €100 million mark were registered in Munich. Cologne also saw several large deals, namely the Friesenquartier and the second section of the Gerling Quartier acquired by Quantum together with Proximus from Austrian Immofinanz, as well as the former Kaufhof headquarters – now HBC Europe Service Center.

While investors in other asset classes are increasingly turning to secondary locations and regional centers in order to satisfy their requirements for return, the top locations remained the key focus in the office segment, despite the steady decline in prime yields. The Top 5 markets accounted for 64 percent of investments. If Cologne and Stuttgart are included, then 75 percent of the total office investment volume was invested in the Top 7. At €4.2 billion, the transaction volume increased by almost 35 percent compared with the year-earlier period.

Fabian Klein, Head of Investment Germany
Due to the extremely limited supply of core properties in prime locations in the investment centers, there is still a significant excess demand. Investors are therefore increasingly prepared to take on more risk – not only in terms of secondary and peripheral locations in the top centers, but also as regards developments and properties requiring more intensive management.
Fabian Klein, Head of Investment Germany

International investors show greater investment dynamics again

For real estate investors with a global reach, Germany continues to top the list in terms of their real estate allocations. What was already apparent from the CBRE EMEA Investor Intentions Survey conducted at the start of the year has now manifested itself in Germany’s investment market in the first quarter, particularly regarding office investments. At around €2.1billion, funds committed by international investors to office properties in the first quarter almost doubled compared with the year-earlier period. Of this amount, just under three quarters were attributable to the Top 7 locations that are still the prime target for foreign investors, even if their focus has meanwhile increasingly shifted toward B-locations. All in all, international investors accounted for 37 percent of the overall investment volume in the first three months, which is 10 percentage points more than a year ago.

Yield compression ongoing

Unabatedly high demand, particularly for office property in the top locations, continues to exert pressure on net initial yields. In all Top 5 markets, the prime yields for first rate office properties continued to decline in the first quarter. As before, Munich reported the lowest figure at 3.20 percent, with Berlin closing in at 3.25 percent (-15 basis points quarter on quarter). The average prime yield for the Top 5 locations currently stands at 3.49 percent.

Given the rising prices, investors are still prepared to invest in locations on the city outskirts as well as in peripheral locations within the top centers. Nonetheless, increased demand here as well is exerting pressure on yields, with yields on the city outskirts already at the level of the year-earlier prime yield, and even significantly below that in Berlin. Only Hamburg and Munich still offer greater spreads.

Outlook: Demand remains strong, risk appetite is growing

“The extremely dynamic start to the 2017 investment year is impressive evidence of how strongly international real estate investors gravitate towards Germany as a safe haven and how much German investors rely on their domestic market, particularly in times of growing uncertainty. We expect the lively investment activity to pick up even more momentum in the remaining quarters,” Linsin says.

“In view of the supply shortage in the core segment, many investors show a higher affinity to risk, a trend that is set to continue as the year progresses. Along with investments in property developments based on forward funding or forward purchase, the huge investment requirements can only be covered if properties requiring more intensive management are acquired additionally, whose value can be enhanced with the requisite market know-how. In addition, we are seeing some investors shorten their holding periods, with properties being sold on faster than originally planned due to the appreciation in capital value,” Klein explains.


Prime rent for office property by sub-market cluster
















Source: CBRE Research, Q1 2017


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













Source: CBRE Research, Q1 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 Group, Inc.

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, 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