Office remains the strongest asset class with 42 percent of the overall investment volume in commercial property

  • Investment volume of €7.6 billion in the first half year

  • Rising prime rent in all locations

  • Lack of Core properties weighs on investment volume in Top 5 markets

  • German investors at 73 percent

  • Prime yields fall below the four percent mark

  • Transaction volume significantly above €20 billion anticipated

Approximately €7.6 billion was invested in German office real estate in the first six months of the current year, thus accounting for 42 percent of the entire commercial investment volume over the same period. The result nonetheless dropped almost one third below the year-earlier figure. This development does not, however, signal slowing interest on part of the investors but is due instead to the lack of properties in the still extremely popular Core segment. This is the conclusion of a current analysis prepared by the commercial real estate services company CBRE.

Dr. Jan Linsin, Head of Research
The demand for German assets continues to run at an uninterruptedly high level. This, combined with the increased uncertainty and associated higher volatility in the financial markets in the wake of the UK’s EU referendum, will ensure that the German property market enjoys even greater popularity with domestic and international property investors as a safe haven.
Dr. Jan Linsin, Head of Research

Rising prime rent in all top locations
The acceleration in office space take-up in particular and the rising level of rents in the top locations of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich spur investment in office buildings. The sustainably achievable prime rent for prime office property continued to climb in all top locations compared with the first six months of 2015, which has pushed the prime rent index up by almost four percent to 224 points, thus delivering impressive proof of the strong and steady demand for premium, central office space. The weighted average rent also rose across almost all locations. Vacancies continued to decline as well, partly very significantly. Alongside huge demand for office space, there is clear evidence of a growing tendency toward conversions, particularly for residential usage and for housing refugees, as well as demolitions or the refurbishment of office properties that are no longer attractive to the market and have stood empty for a long time. As a result, the vacancy rate declined notably across all top locations, by 1.2 percentage points measured against the first six months of 2015 to currently 6.8 percent.

Fabian Klein, Head of Investment Germany
Although the pipeline is well-filled with new or refurbished office space in the Top 5, the high proportion of owner occupation and high pre-letting rates ensure that the space currently available on the market will quickly find users due to the strong demand for new and efficient space.
Fabian Klein, Head of Investment Germany

Thanks to the ongoing robust economic development with record employment figures and a rising number of white-collar workers, take-up of an accumulated 1.5 million sq m was considerably higher in a year-on-year comparison (up 14 percent).

Top 5: Lack of properties in the Core segment weighs on the investment volume
In line with investors’ security-oriented strategy, the Top 5 locations took the lion’s share of 71 percent of investments in the office property segment. Especially here, however, the lack of properties in the Core segment is particularly pronounced, meaning that a significantly higher transaction volume would have otherwise been possible. In the rest of Germany, investments totaled €2.2 billion. The biggest transaction was the Archer portfolio; larger-scale single transactions were completed above all in Stuttgart with the Europa Plaza and the City Plaza and in Hanover with Lister Dreieck. All in all, generally major and medium-sized cities were in demand outside the Top 5 locations. Across Germany as a whole, mainly single transactions were carried out (90 percent). Of the nine transactions concluded in excess of the €100 million mark, which altogether amounted to a good €1.8 billion, only two were portfolio acquisitions. The largest single transactions took place in Frankfurt (IBC International Business Campus, Meandris), Hamburg (Telekom Campus) and Munich (BayWa Tower), among others.

German investors account for 73 percent
German investors who rely on the stability and safety of their home market and, with a share of 73 percent, dominated the market even more strongly than in 2015, tended to invest rather selectively, compared with international players who look for large-scale portfolios in order to quickly ramp up their portfolios in the safe haven Germany. Overall international investors, largely from European countries outside Germany and from North America, invested just under €2.1 billion in German office real estate, especially in the Top 7 locations (Top 5 plus Cologne and Stuttgart).

Asset and fund managers were particularly active, along with open-ended real estate and special funds. “Particularly institutional investors are under great pressure to invest as, in phases of low or even negative interest rates for government bonds, they need to satisfy their yield requirements, as well as manage their cash inflows adjusted for risk – especially funds that are open to the general public. Faced by a lack of alternative investments, these investor groups – both domestic and international – have set their sights firmly on the German real estate market with its robust fundamental data in terms of both the macroeconomic environment and the situation in the property industry,” Linsin explains.

Prime yields fall below the four percent mark
Net initial yields for premium office properties declined at mid-year 2016 in the face of continuously high and partly even increasing demand for Core products in conjunction with a still limited supply of properties. Driven by the lack of alternative investment options – the benchmark yield of 10-year German bonds fell into negative territory at the end of June – the run on German property continues, particularly by institutional investors. Prime yields in the top locations have therefore dropped to their lowest level for decades. In the office property segment, only Düsseldorf and Frankfurt registered prime yields above the four-percent mark (4.10 percent and 4.20 percent, respectively). In Munich, the quarter-on-quarter decline of five basis points was still relatively moderate; Bavaria’s capital city nonetheless continues to report the lowest net initial yield of 3.60 percent for first-rate office buildings. Net initial yields in Berlin and Hamburg dropped by 25 basis points to 3.75 percent in each case. The yields for good investment properties in secondary inner-city sites in the top locations and increasingly in peripheral areas have also come under pressure and partly continued their downtrend as investors more frequently (have to) look for investment property also in these locations, while reviewing their risk propensity in order to fulfil their yield requirements.

Outlook: Transaction volume in 2016 significantly above €20 billion
In view of the current geopolitical developments, the demand for German commercial real estate in general and for office properties in particular, is set to rise. This assumption also derives support from the ongoing strong development of the letting markets. Accordingly, net initial yields in the top locations are expected to decline further. “The demand for good investment products currently outstrips the increasingly scarce availability of properties, particularly in the Core segment. As a result, we are seeing investors turning more toward secondary locations and investing more in project development, both by way of forward funding and forward purchase, in order to participate in the upbeat development of Germany’s office real estate market,” Klein observes. “By the end of the year, we expect a transaction volume of more than €20 billion,” Linsin adds.

Prime rent for office property by sub-market cluster
















Source: CBRE Research, Q2 2016


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











Source: CBRE Research, Q2 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 (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at