Office real estate transaction volume reaches €16.5 billion in the first nine months

  • Investment volume up by around 27% year-on-year

  • Single transactions dominate, with 80% of the overall volume

  • Proportion of foreign investors climbs to 48%

  • Ongoing yield compression caused by high investment pressure


At € 16.5 billion, equivalent to 43 % of the total transaction volume, office properties remain the asset class heavyweight in the German commercial investment market, even if the volume in the third quarter did not quite match that of the second (down 9%). This is the conclusion drawn by the current investment report of commercial real estate services company CBRE. The share of this asset class is even higher in the top locations in particular.

Fabian Klein, Head of Investment
Compared with the year-earlier period, around € 3.5 billion more, an increase of 27%, was invested in German office buildings in the first nine months of 2015.
Fabian Klein, Head of Investment

Office real estate transaction volumes, top yields & benchmark yields

Source: CBRE Research

Single transactions dominate
Single transactions dominated the office segment, including the sale of Frankfurt's Trianon and The Q building located in Berlin, both facilitated by CBRE; roughly only one fifth of the investment volume was attributable to portfolio transactions, down slightly on the prior-year period (27% of the total volume). All in all, 38 transactions worth more than € 100 million each took place in this segment, including the Odin portfolio sold to Orion Capital Partners by Credit Suisse, GE Real Estate sale of properties to Kildare Partners, Union Investment's pan-European Aqua portfolio acquired by Amundi Real Estate, as well as the Bridge portfolio sold by Hatfield Phillips to Apollo Global Management. Further large-scale single transactions comprised, among others, the purchase of the Eurotower in Frankfurt, as part of a share deal for a German pension fund, and of Elisenhof by Axa Real Estate Investment Managers, as well as the sale of the Siemens Campus Neuperlach in Munich.

Compared with the previous year's period, investors focused even more strongly on the Top 5 locations of Berlin, Düsseldorf, Frankfurt am Main, Hamburg and Munich. While in the first three months of 2014, some € 8.5 billion, representing 65% of the total volume, was attributable to these locations, the share grew significantly in the current year to € 12.3 billion or 75%.

German office market as a safe haven for foreign investors
Foreign investors accounted for around 48% of the investment volume throughout Germany. They invested approximately € 2.7 billion, i.e. 51% more year-on-year, thereby taking advantage of the sound fundamentals, which make the German market a safe haven, in conjunction with the current exchange rate advantages. The investment activities of British and US American investors were particularly strong (€ 2.6 billion and € 2.2 billion respectively). Alongside British and German investors, other European investors acquired office real estate worth some € 1.9 billion. Seen overall, foreign investors accounted for 22 of the 38 transactions above the € 100 million mark. German buyers invested almost 11% more than in the year-earlier period while focusing more strongly, compared with international investors, on single transactions rather than on large-volume portfolio acquisitions.

Asset and fund managers above all, who also dominated the entire commercial investment market, invested heavily in office real estate. At € 5.2 billion, they accounted for almost 32% of the total volume, investing a good € 2 billion more than in the first three quarters of 2014, amongst others due large-volume package acquisitions such as the Odin, Aqua and GE portfolios. Open-ended real estate and special funds were the second strongest group of purchasers, reporting an overall share in the market of € 3.1 billion, or some 19%. Third place was taken by listed real estate companies and REITs, which stood at € 1.8 billion, representing 11%. Among other deals, this group accounted for the purchase of the Trianon in Frankfurt. Developers tripled their invested volume year-on-year and were with almost € 1.7 billion invested the fourth largest buyer group.

Continuing decline in initial yields
"Net initial yields for office properties in investment centres continued to decline due to unabatedly strong demand and ongoing investment pressure, particularly by institutional investors, against the backdrop of persistent and extremely limited supply, particularly in the core segment and ultimately in almost all top locations", said Klein. At currently 3.80% in Munich's city centre, they have reached a new low, down another 0.2% compared with the previous quarter. The sharpest quarter-on-quarter decline was, however, reported in Berlin. The capital city saw prime yields decline in top central locations by 0.4 % to a level of only 4.00 %, bringing them to below the level of Hamburg and Frankfurt where yields have stabilised at the previous quarter's figure of 4.10% and 4.40% respectively. In Düsseldorf as well, investment pressure was reflected by a marginal decline in yields to the current level of 4.55 % (- 0.05%).

Overview of the office rental and investment markets in the top five locations

Source: CBRE Research 2015

Low levels of speculative construction, much demolition and greater conversion of office space for use as residential and student apartments as well as hotels, accompanied by growing demand, has resulted in a further shortage of high quality office space in some cities. This scenario is, on the one hand, driving up rents paid for existing space in central locations while, on the other, ensuring that outdated office space increasingly disappears from the market and is brought back to the market immediately after refurbishment – a strategy also pursued by a number of institutional investors with a view to gaining access to desirable core real estate. Yields in peripheral submarkets of the top locations are therefore coming under increasing pressure. "Given the extremely restricted supply of core real estate in central locations, investors have widened their investment horizons to focus on secondary locations in the top office markets. As a result, partly significant yield declines for properties in good locations have been ascertained in this segment as well", commented Jan Linsin, Head of Research at CBRE in Germany. This is particularly prevalent in Berlin where initial yields for properties in desirable office locations within the suburban railway ring, which currently stand at 4.40% (down 0.40% compared with the previous quarter), are mirroring the downtrend of prime locations. In good locations within the Munich ring as well, the investors' alternative strategy is also causing a downturn in real estate yields, which are currently running at 4.50% (minus 0.30%).

Sub-market cluster spreads in the top five office investment markets

Source: CBRE Research 2015

Outlook: total annual volume significantly exceeds the 20 billion euro mark
"For the full year, we anticipate an investment volume in office real estate of significantly more than € 20 billion, particularly as several large transactions are in the pipeline and signing could take place in the last quarter of the year. Prime yields for office real estate remain under pressure in secondary locations as well“, says Linsin. There are increasing signs of a trend reversal in the rental market in the five largest office markets. Robust economic data and the growing confidence of companies are reflected commensurately in higher rental rates. Irrespective of the Greek crisis or China's ailing economy, the rental market is gaining momentum, tracking the very dynamic investment market in Germany. "B locations are also increasingly attracting the attention of investors, as they also reflect the positive and sound economic development and, in comparison to the large investment centres, can nonetheless command even higher yields", stated Klein.


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


More information on CBRE
CBRE Group, Inc. (NYSE:CBG), the Fortune 500 and S&P 500 company headquartered in Los Angeles, California, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). With more than 70,000 employees in more than 400 offices worldwide (excluding affiliates), CBRE serves real estate owners, investors and occupiers of commercial real estate. Core services comprise the areas of capital markets, rental, valuation, corporate services, research, retail, investment management, property and project management as well as building consultancy. CBRE Deutschland established its head office in Frankfurt am Main in 1973, and maintains offices in Berlin, Düsseldorf, Essen, Cologne, Hamburg, Munich, Nuremberg and Stuttgart.