German commercial property changed hands for a total of almost €43.4bn during the first nine months of the year, according to Savills. Approximately €18.5bn was invested in Q3 2019 alone, making it one of the strongest quarters of all time. The third quarter was dominated by a number of major transactions, including the two largest transactions of the year to date; the sale of the Millennium Portfolio by Generali to Commerz Real AG for more than €2.5bn and the acquisition of an interest in Aroundtown by TLG for around €1.6bn.
Marcus Lemli, CEO Germany and Head of European Investment for Savills, said: “In view of this surprisingly high investment volume and with a number of major transactions expected to close in the fourth quarter, we have raised our projected annual transaction volume from the previous €55bn to €65bn. This would represent another new investment record.”
Offices accounted for 46% of the overall transaction volume to date, followed by retail (23%) and industrial/logistics assets (11%). With the exception of shopping centres, initial yields hardened by a further 10 to 20 basis points during the third quarter for all other sectors.
Matthias Pink, Head of Research, Savills Germany, said: “While the German economy remains in an industrial recession, this is having hardly any effect in the real estate markets and none at all in the major cities.” Lemli added: “We have yet to notice investors adapting their rental growth expectations with reference to economic developments. Hence, we currently expect initial yields to harden further during the remainder of the year. However, forecasting uncertainty remains high at present.”
As far as demand for real estate is concerned, the impact of the deferral of interest rate hikes can be expected to outweigh that of the economic downturn, with transaction volumes remaining at a very high level beyond the current year.