The transaction volume on the Munich commercial real estate market in H1 2023 was around EUR 690 million, of which around EUR 185 million was generated in Q2. Compared to Q1 2022, this corresponds to a decline of 53 percent.
Number and volume of office transactions massively reduced
In the first half of 2023, the office segment accounted for 38 percent of the CRE transaction volume, some EUR 265 million, compared to around 74 percent and EUR 1.1 billion in the first half of 2022, a fall of 75 percent.
A total of five office properties changed hands in H1 2023, two of these in Q2, the sale of a building in Sonnenstrasse for around EUR 21 million to CDC Investissement Immobilier and the sale of the “The Source” development project in Baierbrunner Strasse to Pangaea Life Capital Partners for around EUR 60 million.
The largest office deal in H1 involved a core property, which was acquired by an insurance company in Q1 for over EUR 100 million. By way of comparison, twelve office buildings with a total volume of around EUR 1.2 billion were sold in the first half of 2022.
Land and mixed-use buildings the focus of investors’ attention
At 46 percent, the focus of transaction activity in H1 2023 was on property types in the "other" category. The classic asset classes of office, retail, hotel and industrial/logistics receded into the background. Four plots of land and four mixed-use properties were sold for a total of around EUR 320 million. In the 1st half of 2022, the transaction volume for this category was EUR 180 million.
The largest transaction in this segment remains the Q1 2023 sale of land on Seidlstrasse for EUR 250 million.
In the H1, the retail and industrial/logistics asset classes generated transaction volume of only EUR 25 million and EUR 70 million respectively, a decline of 50 percent and 30 percent compared to a year ago. Hotel transaction volume was EUR 10 million in the first half of 2023, compared to EUR 50 million in H1 2022.
Jan Isaakson, Head of Capital Markets Munich C&W, explains: "The price discovery phase between owners and buyers is continuing as long as the central banks' interest rate hike phase is sustained. As soon as the economy recovers, however, catch-up effects are likely to occur, especially in the office sector. This is already noticeable in the willingness of investors to submit solid purchase price offers again in some cases."
Prime office yield continues to rise
The prime yield for high-quality and modern core office properties in Munich was 3.70 percent at the end of Q2 2023, 95 basis points above the previous year's level.
For 1a retail properties, the prime yield in Q2 2023 is 3.40 percent, 40 basis points higher than in Q2 2022. Logistics real estate is trading at a prime yield of 4.15 percent at the end of Q2 2023, 105 basis points above the level of Q2 2022.