Investment Market for commercial real estate reports highest investment volume in a first quarter since records began

  • New record set at the start of 2017: €12.6 billion invested in German commercial real estate

  • Many large-scale portfolio transactions, above all outside established investment centers – proportion of the Top 5 locations at 37 percent

  • Prime yields remain under pressure, especially in the extremely popular office segment

Following a sensational year-end rally in 2016, the German investment market for commercial real estate continued its impressive stellar growth story. At €12.6 billion, the investment volume reached its highest ever level for a first quarter since records began in 2003, a record figure that outperformed the year-earlier transaction volume by almost 50 percent. This is the conclusion drawn in a current analysis prepared by commercial real estate services company CBRE.


Fabian Klein, Head of Investment Germany
The very good fundamental data of the German investment market reflect what was apparent from our survey conducted at the start of the year on real estate investors with a global reach regarding their geographic allocation. While 22 percent of the respondent investors again voted for Germany as Europe’s most attractive investment location, our research data shows the highest investment volume ever registered for a first quarter since the beginning of 2003.
Germany is the ‘place to be’, above all for foreign investors who anticipate earnings from currency-induced effects, along with their financial gains. Although recent months have seen geopolitical turbulence and imponderables cause excess demand to rise again in the investment hubs, particularly in the core segment, it seems that some institutional investors, above all in Germany, are nonetheless prepared to take on greater risks and thus greater opportunities in terms of locations and assets in order to fulfil their allocation targets in this country.

Fabian Klein, Head of Investment Germany
Dr. Jan Linsin, Head of Research Germany
While various permutations of potential coalition partners are already being considered in this bumper election year, the traffic light is on green for investors, with a clear allegiance to Germany as an investment and production location.
Above all, the letting markets are reaping the benefits of the very robust economic development: Sustainably high letting take-up, vacancy rates partly below the natural threshold, moderate rental price growth and a property development pipeline free from unrealistic exaggerations ensure a stable foundation and therefore secure cash flows in the long term.
Dr. Jan Linsin, Head of Research Germany













Source: CBRE Research, Q1 2017


More moderate increase in investment volume in the top locations – Berlin and Munich as the strongest top markets

At some €4.7 billion, around 37 percent of the transaction volume was attributable to the Top 5 locations, representing an increase of 19 percent in a year-on-year comparison. Lack of property in the investment centres is driving stronger investment in regional centers and secondary locations. As a result, a significantly higher growth in transaction volumes was registered here. Of the top locations, Berlin took the lead with just under €1.7 billion (up 75 percent compared with the first quarter of 2016), followed by Munich with €1.3 billion (up 25 percent). Düsseldorf (€457 million, up 30 percent) and Frankfurt (€821 million, up 20 percent) also reported higher transaction volumes than in the prior year period. Only Hamburg registered a year-on-year decline in the investment volume that came in at €448 million (down 52 percent). This indicates that the dearth of property in Hamburg has slowed down the investment market there for the time being, particularly in central locations. For the remainder of the year, however, there are already signs of several large-scale and big ticket transactions materializing.











Source: CBRE Research, Q1 2017

Office real estate remains the strongest asset class - very sharp increase in retail property

At just under 45 percent, a major part of the investment volume continued to be channelled into office real estate, structured mainly as single deals, supported by large-scale transactions. As many as four transactions, each of more than €100 million, were recorded in Germany’s capital city, including the Cube Berlin 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. The sustained positive development of the office letting markets and another projected increase in the number of white collar workers will keep this asset class very attractive for investors.

The second largest investment volume was attributable to retail assets (30 percent) that reported the sharpest increase (growth of 144 percent) of the asset classes in a year-on-year comparison, boosted in particular by several large-scale portfolio deals. Compared with the first three months of 2016, more funds were also invested in the alternative asset classes of logistics/warehouses (share of 11 percent, up 31 percent against the year-earlier period) and hotels (share of nine percent, up 55 percent).


Resurgent greater presence of international investors on the German commercial market

In comparison with the previous year, international investors, especially from the United States (share of 15.5 percent), the United Kingdom (just under 10 percent) and Switzerland (just under six percent) increased their commitment to the German market again. Overall, foreign investors committed funds of almost €5.5 billion (43 percent of the total volume, representing a year-on-year increase of €2.7 billion), including a portfolio deal concerning US investment company Blackstone, with CBRE acting in an advisory capacity, that was by far the largest transaction in the first quarter. Generally speaking, international investors focused more strongly outside the top locations, often in the context of nationwide portfolios. Consequently, the share of portfolio transactions climbed by four percentage points to 27 percent.


All in all, 25 transactions over the €100 million mark were concluded, including eleven portfolios. “More than half of all large-scale deals were transacted by international investors who appreciate Germany as a safe investment haven, above all owing to the country’s politically stable situation, its good economic fundamentals, strong liquidity and market transparency. Foreign investors concentrated increasingly on the asset classes of logistics and retail: firstly because the value chains in logistics require state-of-the-art real estate concepts, and secondly because online retail is far from reaching the limits of its growth. Moreover, supply chains in this business, above all the last mile, also generate strong demand for logistics space. Apart from this, food and non-food retail warehouses, local suppliers and supermarkets in the retail segment appeal to investors as well, despite the rising proportion of online activity in this segment,” comments Linsin.


Net initial yields remain under pressure

Unabatedly high demand, particularly for office property in the top locations, continues to exert pressure on net initial yields. In all Top 5 markets, prime yields for premium office properties continued to decline in the first quarter. As before, Munich reported the lowest figure at 3.20 percent, with Berlin at 3.25 closing the gap considerably (-15 basis points quarter on quarter). Average prime yield currently stands at 3.49 percent in the Top 5 locations. Prime yields for prime retail properties in central shopping locations continued their downtrend in Berlin (to 3.25 percent) and Hamburg (to 3.40 percent), and now average 3.35 percent in the Top 5. In the shopping center segment and with retail parks, net initial yields remained at their lowest levels of 4.00 percent and 5.00 percent that were reached at year-end 2016. For the time being, the prime yield of premium logistics properties remained stable below the five percent mark at 4.90 percent. In the hotel sector, the prime yield of 4.50 percent also flatlined at the level of the previous year’s quarter.

Outlook for 2017: potential investment volume of €50 billion

“The extremely dynamic start to the 2017 investment year is impressive evidence of how strongly international real estate investors gravitate toward Germany as a safe haven and how much domestic investors rely on their domestic market, particularly in times of growing uncertainty. We anticipate that the brisk investment momentum in the remaining quarters will accelerate further and that an investment volume of €50 billion can be achieved, especially as further large-scale transactions at portfolio level as well as with trophy buildings are already on the cards and will take place at the start of the second quarter,” states Klein. “Whether the 50 billion euro mark can be exceeded again depends exclusively on product availability as the demand for German real estate is abundant.”


“We currently observe a greater risk appetite on the part of investors that, given the shortfall in property in the core segment, is set to increase. Along with investments in property developments based on forward funding or forward purchase, the huge investment requirements can only be covered if additional acquisitions are also made of more management intensive properties whose value can be enhanced with the requisite market know-how. Moreover, we are seeing shorter holding periods with some investors and that property is sold on faster than originally planned due to the increase in its capital value,” adds Linsin.










Source: Bundesbank, CBRE Research, Q1 2017





























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