Market Report 2011 GerMany - Europe Real Estate

of Munich, Dusseldorf and Hamburg (each with €1 billion office investments). They
also outperformed the two smaller locations of Cologne and Stuttgart, both of which
recorded office building transactions valued at around €265 million.
However, based on overall volume of commercial investment, Berlin and Hamburg
were the leaders due to additional extensive transactions involving retail properties.
In the seven major locations, office properties accounted for 56% of overall investment
in commercial property on average, with the latter amounting to a total of €11.5
billion.
Slight shift in ownership structure in major locations
Ignoring for the moment the fact that foreign players made up a relatively small share
of 32% of the overall investment volume in the seven major markets (Germany 37%),
the purchaser profile was broadly identical to that at national level. Investors backed
by equity also dominated the demand side and tended to increase their property portfolios.
In contrast, the builders, project developers as well as equity and real estate funds
that were the dominant net investors during the high-price boom years of 2005
to 2008 were particularly active as sellers. Calculations based on data supplied by
BNP Paribas RE put the proportion of foreign investors involved in sales in the major
locations during the past year at 39% (2009: 35%).
Yield compression in the prime segment in the major cities
Interest among potential investors and real estate financiers over the past year
focused in particular on the core segment, in other words, on high-quality properties
leased on a long-term basis in prime locations in the major cities. Initial yields for
prime office buildings in the seven leading office markets therefore fell significantly
during the last year from an average of 5.4% to 5.06%. Prime initial yields are now
in the range from 4.85% in Munich to 5.3% in Stuttgart.
In contrast, there were still no signs of significant downward yield compression in
equivalent properties in city suburban locations (average value 5.75%) and in and
peripheral locations (average value 6.85%) in the major office markets, not to mention
yields for properties with problematic lettings, quality or locations, which were not yet
on the radar of potential investors.
Likewise, the regional office market centres have so far not experienced any
significant fall in initial yields. Prime initial yields here range between 6% (e.g. in
Essen) and 9% despite the significantly lower yields achieved in individual cases such
as Hanover.
Net investors in 6 major markets
in € billion
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
'0 5 '06 '0 7 '08 '0 9 '10
Equity investors *
Promoter
Prime office initial yields
5.75%
5.25%
4.75%
4.25%
Berlin
Frankfurt
Cologne
Equity Funds
Other
* Equity investors include: Open-ended and closed-end funds,
insurance companies, pension funds, private investors.
Source: IVG Research based on data from BNP Paribas RE.
Source: IVG Research
'0 0 '02 '0 4 '06 '0 8 '10 '1 2e
TOP 7: Ø Prime initial yields
7,0%
6.5%
6.0%
5.5%
5.0%
4.5%
Dusseldorf
Hamburg
Munich
'0 9 '10'11e Centre
Periphery
City suburban location
Comment: Forecast 2011 as range
Source: IVG Research
21