The commercial real estate and development land transaction volume for the Frankfurt market amounted to around EUR 365 million in H1 2023. Compared to a year previously, this corresponds to a decline of 89 percent. This result was 84 percent below the H1 10-year average and the lowest for 13 years.
Office property strongest asset class
With 44 percent (EUR 160 million), office properties were the largest contributor to transaction volume in H1. The largest transaction in this asset class was the sale of Kölner Strasse 10–12 in Eschborn to French investment manager Advenis for around EUR 70 million in Q2. Mergenthalerallee 45–47 in Eschborn also changed hands in Q2. Property developer Cilon bought the building from alstria Office REIT-AG as part of an off-market transaction with the aim of refurbishing and repositioning it.
Industrial and logistics properties generated H1 transaction volume of around EUR 50 million and were thus responsible for around 14 percent of the total CRE transaction volume in the Frankfurt market area. The acquisition of a logistics portfolio at Frankfurt Airport by Peakside Capital Advisors made a significant contribution here.
As a result of Signa's 20 percent share buyback in the Galeria Kaufhof building at Hauptwache, the transaction volume contribution of retail properties rose to around 16 percent.
In the first half year, the proportion of international capital amounts to approximately 57 percent (EUR 207 million). Market activity has focused largely on small-volume office and mixed-use properties.
Michael Fleck, Head of Capital Markets Frankfurt at Cushman & Wakefield, explains: “Particularly large-volume office transactions of more than EUR 100 million, which have stimulated the market in recent years, are currently failing to materialise. This reflects the reluctance of market participants under current conditions. However, via increased requests for pitches and purchase price estimates, we are gaining a good idea of the range in which purchase prices would have to move.”
Prime office yield at 3.95 percent
The net initial yield for first-class quality office properties in prime locations was 3.95 per cent at the end of Q2 2023. This represents an increase of 15 basis points compared to the previous quarter and an increase of 110 basis points compared to Q2 2022. The net initial yield for first-class office properties in non-central locations remains constant at 5.50 per cent compared to the previous quarter and is 95 basis points higher than a year ago.
First-class logistics properties are currently trading at a prime yield of 4.15 percent. Compared to the end of March 2023, this value has remained stable. For city centre high street commercial buildings, 4.10 percent was quoted, and this value also remains at a stable level compared to Q1 2023. By the end of the year, C&W expects yields to continue to rise.