Even though Germany is virtually spending holidays together this week and it appears to be calmer, it is clear that the commercial real estate markets at the 7-top locations are currently experiencing only a slight easing.
In the first half of 2019, office letting turnover at these top office locations rose by around 9% year-on-year to 1.87 million sqm. The German commercial investment market continues to be highly dynamic, with a transaction volume of around € 24.3 billion achieved in the first half of the year. Despite a slight decline (-5 %) compared to the previous year, this result is more than satisfactory. And for several reasons:
- On the one hand, it is clear that the markets are obviously reacting to the global political weather situation (including the trade dispute) and are therefore weighing them more cautiously.
- On the other hand, we see some catch-up effects from deferred transactions in Q2 - keyword here Brexit end of March/beginning of April.
- Thirdly, however, it can also be stated that some large portfolios offered on the market, such as the "Millennium Portfolio" or large individual properties such as "The Squaire", are being examined intensively - with the result that in Q3 or Q4 2019 there may be a signing or closing here.
However, what is currently so positive meets two market aspects that describe the classic Yin & Yang in the current real estate situation:
- Here is the extension of the "zero interest rate world" expected by the majority of analysts, including the change of staff at the ECB from Mario Draghi to Christine Lagarde and the associated sustained high liquidity on the real estate market,
- The most common sentiment indicators there, such as the ifo Business Climate Index or IMF Economic outlook, are the expected national and global economic slowdown - i.e. the window of opportunity before a recession.
As you can see, there are still good arguments in favour of the stability and attractiveness of the asset class "commercial". At the same time, in the coming weeks and months we will receive a number of sentiments and forecasts regarding an imminent trend reversal of the economic indicators on the financial and capital markets that are ahead of the real estate markets.
The other results in detail:
- TOP 7 Vacancy rate (average): 3.60%
Over the last 12 months, the vacancy rate on all top 7 markets has fallen by a total of 0.63 percentage points to an average of 3.60% at the end of June 2019.
- TOP 7 Top rents (average): 31.61 €/sqm
Due to the still very strong demand for office space and the lack of top office space in city locations, top office rents have risen further in all markets. The average rent in the top 7 markets is approx. 31.61 €/sqm, an increase of approx. 5 % over the previous year.
- TOP 7 Peak yield (net, average): 3.03%
The continuing shortage of supply and high competition in the core segment are causing prime yields for office properties in the top 7 markets to fall to an average of 3.03%. Compared to the previous year, this represents a decline of 17 basis points.