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The prosperous years are over - weak commercial real estate transaction volume in 2022

Verena Bauer • 09/01/2023

According to research by international real estate consultancy Cushman & Wakefield, a transaction volume of EUR 11.5 billion was achieved by the German investment market for commercial real estate in the fourth quarter of 2022. This is approximately 9 percent less than in the previous quarter. The total for 2022 of around EUR 51.7 billion is 14 percent below the level of the previous year and the weakest result since 2015. 

Interest rate turnaround and war in Ukraine depress sentiment

With the ECB's interest rate turnaround, which had been expected since spring 2022 and took place in the summer, the strong sales momentum of the past years came to a sudden standstill. Pricing real estate, especially core properties, has been a challenge since then, due to market participants’ expectations of further interest rate increases.

In addition, the war in Ukraine has hit the German economy particularly hard, due to the country’s high dependence on Russian gas supplies, leading to fears of recession. Although the decline in economic output forecast for 2023 will less severe than originally expected, C&W anticipates that numerous investments will be re-considered, reassessed and ultimately postponed in 2023. 

"In 2023, we will probably see a transaction volume of significantly less than EUR 50 billion. The first half of the year in particular will still be characterized by uncertainty and restraint. By mid-year at the latest, however, a solid interest rate corridor and renewed confidence in positive economic development should boost the market again. However, we will have to say goodbye to the exit prices achieved at the beginning of 2022. The “fat” years are over for now," Alexander Kropf, Head of Capital Markets at Cushman & Wakefield in Germany, clarifies.

Yields continue to rise

Following the increases of the 2nd and 3rd quarters of 2022, prime yields for all types of commercial real estate were again adjusted upwards in the 4th quarter. At the end of the year, the median yields were 3.51 per cent for office properties (+28 basis points), 3.60 per cent for commercial properties (+12 basis points) and 4.00 per cent for logistics properties (+39 basis points). The median prime yield for offices is thus higher than at any time since mid-2017.

Munich is the most expensive office market with a prime yield of 3.30 per cent, followed by Frankfurt and Hamburg (both 3.35 per cent), Düsseldorf (3.50 %) and Berlin (3.60 per cent). For commercial properties, Munich and Düsseldorf are the most expensive markets with values of 3.20 per cent each. Logistics properties are quoted at the same level in all top-seven regions (4.00 per cent). C&W expects the rise in yields to continue in the coming months.

Office and logistics properties account for more than half of the transaction volume

Office properties continued to be the main focus of investor interest, accounting for 40 percent (EUR 20.4 billion) of total commercial real estate transaction volume. Logistics and industrial properties followed in second place with a contribution of 18 percent (EUR 9.3 billion). 

While the office sector recorded a year-on-year decline of around 27 percent, the transaction volume for logistics and industrial properties rose by 4 percent. Both of these asset classes benefited above all from a strong first quarter, in which around 47 percent of office transaction volume and around 42 percent of industrial and logistics transaction volume was realized.

Retail properties generated a transaction volume of EUR 7.9 billion, 15 percent of the total. Thanks to a major deal in the third quarter, this was an increase of 9.5 percent compared to 2021.

With an annual result of EUR 5.8 billion, and 11 percent of the total, mixed-commercial properties ranked fourth and achieved the largest increase in transaction volume with a plus of 15 percent. C&W attributes the in-creased investor interest primarily to investors spreading risk across asset classes.

Hotel transactions accounted for 4 percent of market activity. Compared to the previous year, the investment volume decreased by around 22 percent to EUR 1.8 billion.

The largest portfolio transaction in 2022 was the takeover of alstria office REIT-AG by the Canadian Brookfield Asset Management for more than EUR 4 billion. This was followed by the shareholding increase in Deutsche Euroshop AG, and thus in the shopping centres, by Oaktree and Cura Vermögensverwaltung for well over EUR 1 billion.

The largest single-property transaction was the sale of the Marienturm office tower in Frankfurt am Main for over EUR 800 million to DWS for NPS (Korea). This was followed by the sale of the mixed-use Sony Center in Berlin (50 percent) for EUR 677 million to NBIM (Norway) and the acquisition of parts of the Quartier Heidestraße in Berlin by Imfarr (Austria) for around EUR 490 million.

Domestic capital dominates

Portfolio transactions, which also include corporate investments and takeovers, accounted for 32 percent of the transaction volume. Domestic capital contributed 57 percent to the overall result, similar to the average of the previous five years.

Berlin strongest top-7 market in terms of turnover

Around EUR 26.7 billion was invested across the top-7 markets in 2022, which corresponds to 52 per cent of the total transaction volume. Compared to the previous year, this was a decline of 22 percent. 

Berlin leads the ranking with a volume of EUR 8.5 billion, followed at a considerable distance by Frankfurt at EUR 4.6 billion, Hamburg with EUR 4.1 billion, Munich with EUR 3.7 billion and Düsseldorf with EUR 3.3 billion. Cologne and Stuttgart trail at EUR 1.3 billion and EUR 1.2 billion respectively. Only Düsseldorf and Hamburg recorded increases in transaction volume compared to the previous year, not the least thanks to their high number of properties which changed hands in the course of the Alstria acquisition. The other markets fell significantly short of their previous year's figures.


verena bauer
Verena Bauer

Head of Business Development Services, Germany • 60311 Frankfurt am Main


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