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Düsseldorf’s commercial CRE investment market improves, prime yields expected to continue moving sideways

Verena Bauer • 11/04/2024

According to research by international real estate consultancy firm Cushman & Wakefield (C&W), the commercial real estate investment market in Düsseldorf and its extended logistics market area achieved a transaction volume of EUR 260 million in the first quarter of 2024. This was around 13 percent higher than a year earlier. Market activity as a whole continues to be held back by the tight financing environment.

Mirko Kittler, Partner Capital Markets Düsseldorf at C&W, on the prospects: “Speculative new office buildings are currently not placeable on the market. On the one hand, from the point of view of institutional investors, the risk is too high and, on the other hand, banks without a corresponding capital deposit are acting very restrictively. All the more reason for investment to focus on the upcoming completions, some of which already have high pre-letting rates. Looking ahead, we expect the strongest willingness to buy here with increasing competition among investors.”

Transaction volume: Partial sale of KII boosts result, institutional investors continue to hold off

  • Despite an increase compared to the previous year, the transaction volume fell short of the Q1 5- and 10-year averages by almost 57 percent and around 50 percent respectively.
  • The largest transaction to date was B&L’s acquisition of a 35 percent stake in the Centrum Group's KII mixed-use property in Schadowstrasse. If this takeover is excluded, the CRE transaction volume would have remained well below the EUR 200 million mark.
  • On the buy-side, institutional investors continued to take a wait-and-see approach. The majority of the transaction volume was contributed by acquisitions by private individuals, family offices and the public sector.
  • Foreign investors have been inactive thus far. 

Yields: Expected to stabilise in 2024

  • At the end of the 1st quarter, the prime yield for core office properties stood at 5.00 percent, unchanged from the previous quarter. Compared to Q1 2023, however, it has risen by 110 basis points. 
  • The prime yield for commercial buildings in 1a locations was unchanged from the previous quarter at 4.45 percent, 35 basis points above the level of Q1 2023. 
  • The prime yield for core logistics properties stood at 4.50 percent at the end of Q1 2024, unchanged from the previous quarter, but 35 basis points higher than at this point last year.
  • Over the course of 2024, C&W expects prices and yields to stabilise across all asset classes. Inflationary pressures have continued to ease, while the economy has weakened. An early cut in the key interest rate is therefore becoming increasingly likely. As bond yields fall, confidence in a more attractive financing environment is also growing.

Property use types: Office and retail properties weak, logistics not represented

  • The office sector remains well below the transaction volume of recent years. In the 1st quarter of 2024 totalling just under EUR 50 million (17 percent of CRE total). This is almost 30 percent less than a year earlier.
  • The structural change in the office sector with high desk-sharing ratios and significant general uncertainty with regard to future space requirements is causing demand here to stagnate. 
  • The retail transaction volume was very low in the first three months, contributing only around 4 percent of the CRE total. As in the previous year, hardly any retail properties were traded.
  • The strongest category was the “other uses” category, accounting for around EUR 180 million and 67 percent of the total. This also includes the acquisition from Centrum of a share in the mixed-use KII property by B&L. In addition, the city of Ratingen acquired a building plot of around 30,000 m² in the Schwarzbach district on Balcke-Dürr-Allee.
  • The sale of a serviced apartment property at Wehrhahn 43 to the family office Wilhelm von Opel'sche Forst- und Grundstücksverwaltung was responsible for a large proportion of the hotel transaction volume, which contributed around 12 percent of the CRE total.
  • To date, no transactions of logistics industrial properties have taken place in the Düsseldorf market area including its surrounding municipalities.

C&W Investment market Düsseldorf Q1 2024

 

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verena bauer
Verena Bauer

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

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