Investment market Hamburg: Weak Q1 result despite increasing market momentum

"The current result does not reflect the large-volume transactions currently under negotiation or the pipeline of attractive products that has gradually grown since the beginning of the year. It is particularly significant that in the persistently challenging environment, in which marketing processes take longer due to very careful acquisition reviews and, in particular, changing financing conditions, only a few major deals were successfully brought over the finish line directly at the beginning of the year. However, they are still in concrete negotiations. Investor interest remains high in Hamburg, which is known for its stable user markets," explains Heiko Fischer, Managing Director and Hamburg Branch Manager of BNP Paribas Real Estate GmbH.

After commercial buildings in prime high-street locations and logistics properties recorded yield increases of 10 and 25 basis points respectively in the past twelve months and prime office yields remained constant, the yields of all three asset classes are stable compared to the previous quarter. For example, the net prime yields for logistics properties are 4.50%, for office properties 4.25% and for commercial buildings 3.85%.

With a market share of 67% and thus a three-digit sales volume, Büro is the strongest asset class, driven by transactions in the small and medium-sized segment in central city locations over long stretches. This is followed at a considerable distance by the "Other" collective category with a volume of € 46 million, which currently includes healthcare and care properties in particular, but also mixed-use properties and development properties.

The highest investment volume at the start of the year was achieved by the outskirts of the city. Investments in mixed-use and hotel properties contributed to the market share of 52%. In contrast, investment turnover in the city (25% market share) was traditionally driven by office and commercial buildings.

The distribution of investment volume across the various size classes is much more balanced at the beginning of the year than in the previous year. Trades between €10 million and €25 million and €25 million or more each contribute around 25% to earnings. A further 8% is accounted for by deals of less than €10 million. The overall transaction structure, which has so far been rather fragmented, is also reflected in a comparatively low portfolio share of 19% (Ø 10 years: 28%) and in a lower average deal volume of € 20 million.

"Even though the Hamburg investment market is not yet experiencing a high volume at the start of the year, the conditions for a market revival in the further course of the year are in place. Stable user markets and rising rents in many asset classes support the attractiveness of the location from an investor's point of view. Together with a growing number of concrete negotiations, this is likely to be reflected in increased closing activity in the coming months. In the office asset class in particular, there are already signs of a revival in transaction volume in the further course of the year. Several major deals have been postponed to 2026, while other transactions are currently being marketed or in preparation. In the other asset classes such as hotels and retail, major deals are also currently being initiated," says Heiko Fischer.

However, the armed conflicts in the Middle East and their potential impact on energy supply, inflation, interest rates and financing conditions continue to cause uncertainty. Against this backdrop, a slowdown in the pace of transaction processes cannot be ruled out, nor can selective yield adjustments. However, with increasing predictability on the investor side, the market recovery should continue. An investment volume of around €2 billion, which is slightly above the previous year's level, therefore remains a realistic scenario.

Link to the market report: https://www.realestate.bnpparibas.de/marktberichte/investmentmarkt/hamburg-report