In Q4 2021, around EUR 2.8 billion of commercial real estate was transacted in Munich. This brought the city’s 2021 total transaction volume to around EUR 6.7 billion, reports real estate consultancy firm Cushman & Wakefield. Compared to the previous year, this corresponds to an increase of 29 percent.
84 percent of volume was generated by the office sector
The main reason for the high result of the 4th quarter was three large-volume transactions above the 500 million EUR mark. They contributed more than EUR 1.7 billion, accounting for 60 percent of the transaction volume. All deals involved office properties, namely "Pandion Officehome (Soul)" in the Werksviertel district for EUR 600 million, the "Uptown" high-rise in Moosach for EUR 565 million and "Elementum" at the main railway station for EUR 512 million.
In 2021 as a whole, the size category above EUR 100 million saw 15 deals and contributed 68 per cent of the total volume - making it the largest turnover driver of Munich’s investment market. Office properties continued to be the centre of investors’ attention and were the dominant asset class, accounting for 84 per cent of the commercial real estate transaction volume. Hotel properties followed well behind in second place with around 7 per cent. Logistics and industrial properties accounted for only two per cent of the volume. The retail share was less than one percent.
Focus remains on low-risk assets
70 percent of the commercial real estate transaction turnover volume in 2021 was attributed to low-risk properties in the Core and Core+ risk classes. Opportunistic and value-add properties played only a minor role in transactions in Munich last year. The participation of foreign capital was 33 per cent and thus comparable to the previous year's figure.
Jan Isaakson, Head of Capital Markets Munich at Cushman & Wakefield, summarises: "The run on real estate in Munich continues unabated. This remains true even after a second pandemic year. Yields are at record lows, prices per square metre are rising and transaction volume is in line with previous years. Especially in the CBD, office property prices per square metre are continuing to increase, driven by strongly rising prime rents. The existing pipeline gives points to a similarly vibrant market in 2022. Further market potential is offered by value-add and opportunistic product, which some investors are already eagerly awaiting."
Prime yields continue to compress
The prime yield for high-quality core office properties with a creditworthy tenant mix and long-term leases in prime locations was 2.50 per cent at the end of 2021. Compared to the previous year, this corresponds to compression of 10 basis points. In non-central locations, a level of 3.20 per cent was reached - 10 basis points below the level of twelve months ago. The yield for high-quality logistics properties is currently 3.00 per cent, which corresponds to compression of 40 basis points compared to the previous year and reflects the high level of competition for the acquisition of properties in this asset class. Further yield compression is to be expected. Prime yield compression for 1-A retail properties are again becoming evident, having decreased by 25 basis points to the 3.05 per cent over the last 12 months.