Hamburg's commercial real estate transaction volume was around EUR 450 million in H1 2023. This is the lowest H1 result since 2009, during the financial crisis, and represents an 80 percent decline from the previous year's equivalent figure of EUR 2.28 billion, although this figure had been substantially boosted by the alstria office portfolio transaction. The result also fell 75 percent short of the H1 5-year average of some EUR 1.79 billion.
Office properties and office development projects generate highest transaction volume
Office real estate and development projects were the dominant asset classes, with a total transaction volume of EUR 270 million in H1, some 60 percent of the CRE total. This is 84 percent below the very high figure of the previous year (EUR 1.64 billion). The largest office transaction, at EUR 119 million, was also the largest CRE transaction in the Hamburg market in H1. PPS Immobilien Holding sold the Fritz-Schumacher-Gebäude on Gänsemarkt in the City Centre submarket to the City of Hamburg for its own use.
Low level of activity in the logistics and retail sectors
The second-strongest performer, with a transaction volume of around EUR 100 million and some 22 percent of the CRE total was the logistics and industrial sector. This fell 64 percent short of the previous year’s mid-year figure of EUR 280 million. The largest single-property transaction was the sale of Panattoni Park Hamburg Nord to J.P. Morgan Asset Management and Cromwell Property Group in Q1 (over EUR 90 million). At around EUR 30 million, retail properties contributed only 7 percent of CRE transaction volume.
Niklas Hensiek, Associate CM Investment Sales at Cushman & Wakefield, explains: "The continuing economic uncertainty is causing restraint in the real estate investment market. Office real estate, which has traditionally been the leading investment asset class, is also being weighed down by the structural change in workplace strategy with the rise of hybrid models incorporating remote working. As soon as market participants’ price expectations converge once more, a pick-up in the market should therefore occur by the end of the year."
Yields continue to rise
The rise in yields for prime office properties triggered by the turnaround in interest rates in the summer of 2022 continued unabated in the 2nd quarter of 2023. The net initial yield for prime office properties in Hamburg's central locations was 4.00 percent at the end of Q2 2023. That is 110 basis points more than a year ago. The prime yield for 1a retail properties is currently 4.10 percent. The year-on-year increase is 50 basis points. For logistics properties, the prime yield stands at 4.15 percent, an increase of 105 basis points compared to Q2 2022.
As the ECB has raised the key interest rate eight times in the past twelve months and further increases are expected, Cushman & Wakefield expects further yield increases in these major commercial real estate asset classes.