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Further rise in yields for office properties in Berlin’s investment market foreseeable

Verena Bauer • 12/10/2022

For the first three quarters of 2022, the internationally active real estate consultancy Cushman & Wakefield registered commercial real estate transactions in Berlin with a volume of EUR 5.92 billion. This is 12 percent less than in the previous year and 8 percent less than the 5-year average. At EUR 2.14 billion, the transaction volume in the third quarter was slightly higher than in the previous two quarters.

Large Transactions Shape Market Activity

The transaction volume in the current year has been largely shaped by large transactions over 100 million EUR. 16 properties in this category changed hands for a total of more than EUR 3.8 billion to the end of the third quarter. Portfolio transactions played a subordinate role, accounting for EUR 940 million or 16 percent of the total volume in the first nine months of 2022. Demand from abroad for commercial real estate in Berlin remained high. The proportion of foreign capital was 61 percent.

"However, some of the largest transactions were non-standard purchase processes, which conceal the fact that the market is currently in a difficult situation. For example, buyers were active who, due to conditions, could only buy in very selected locations, and there only specific product, and therefore had a special buying interest," clarifies Clemens von Arnim Head of Capital Markets Berlin at Cushman & Wakefield.

Office properties generate the highest turnover

With EUR 2.85 billion and 48 percent of the total transaction volume, office properties were again the asset class making the largest contribution in the first nine months. Seven transactions exceeded the EUR 100 million mark. The two largest office transactions took place in the third quarter, the sales of Voltair and TechnoCampus Berlin. 

Mixed-use properties achieved a volume of just under EUR 1.8 billion. This included the largest transaction of the current year, the sale of 50 percent of the Sony Center for EUR 677 million in Q2 to Norges. Regarding Q3, the sales of QH Core and QH Spring are particularly worthy of note, changing hands for a total of EUR 456 million. 

Despite sharply increased financing interest rates and construction costs as well as economic uncertainty, commercial plots in the capital were in demand and generated a transaction volume of EUR 575 million.

Logistics and industrial properties achieved a somewhat weaker result than in the equivalent period last year (EUR 500 million, 7 percent) with EUR 365 million and 6 percent of transaction volume. With EUR 130 million and a 2 percent share of turnover, retail properties played only a very minor role.

Interest rate rise not yet fully priced into yields

The current prime office yield is 3.20 percent, 60 basis points higher than a year ago. The rise began with 25 basis points in the second quarter and continued in the third quarter with a strong increase of 35 basis points. C&W expects yields to continue to rise until the end of the year, as the current level of financing rates has not yet been fully priced in.

The prime yield for logistics properties also increased significantly and currently stands at 3.60 percent, which is 50 basis points more than in the previous quarter and has returned to the level of a year ago.

The increase for commercial properties in central prime locations was smaller. At 3.40 percent, the prime yield here is only 10 basis points above the previous quarter and still 5 basis points lower than for Q3 2021. 

Clemens von Arnim explained: "Although office yields have already risen strongly, the spread with the 10-year federal bond is still very low. At the current level of bond yields of over 2 percent and a prime office yield of 3.20 percent, the risk premium is only just over 100 basis points and thus not attractive for many investors. We only see such low spreads in times of crisis, most recently in 2008 and the early 2000s. In order to significantly boost transaction volumes again, we would need more stable macroeconomic conditions regarding Inflation, economic growth, government bonds and financing rates." 


Investment Market Berlin Q3 2022

Investor interest in core properties wanes

Core properties made the largest contribution to transaction volume at 33 percent, although this is a fall of 8 percentage points compared to a year ago. Due to the increase in financing interest rates and still low rental yields, this risk class has become less attractive than others to investors, who are increasingly adopting a wait-and-see approach due to the difficult pricing process. Value-add properties accounted for 25 percent of volume, followed by Core+ with 21 percent and Opportunistic with 17 percent.

Year-end rally unlikely

C&W does not expect a year-end rally in Q4. The current energy and inflation problems indicate that financing conditions are unlikely to improve in the near future and that the transaction volume will therefore decrease significantly next year.


verena bauer
Verena Bauer

Head of Marketing & Communications Germany, Cluster Lead • 60313 Frankfurt am Main


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