After office investments had lost their dominant role as the most important asset class in the last two years, they have once again taken the lead in terms of transaction volume in the current year. With a result of just under €4.47 billion, they were able to increase their previous year’s figure by around 23%. This means that they are responsible for a good quarter of the investment turnover in commercial real estate. This is the result of the analysis by BNP Paribas Real Estate.
“It is particularly noteworthy that this significant increase in sales was achieved despite the fact that not a single significant portfolio transaction has yet been registered. Individual transactions, on the other hand, increased on a broad basis. In C-cities with between 100,000 and 250,000 inhabitants, for example, the transaction volume quadrupled,” says Franc Gockeln, Managing Director and Head of Office Investment at BNP Paribas Real Estate GmbH.
The market recovery is also reflected in the fact that more large-volume deals are being concluded again. Examples include the sales of the Upper West in Berlin or the Atlantic Haus in Hamburg. In total, five deals in the three-digit million range have already been recorded in the first three quarters, which together have contributed well over € 1 billion to investment revenue.
The yield compression in 2025 expected by many market participants has not materialized. Accordingly, the prime yield across all A locations remains unchanged at 4.36%, with Munich being the most expensive location at 4.20%, followed by Berlin and Hamburg at 4.25% each. Cologne and Stuttgart are in second place with 4.40%. Bringing up the rear and cheapest A locations are currently Frankfurt and Düsseldorf with 4.50%.
Significant increase in turnover at A-locations
Sales in the A locations amount to around €3.4 billion. Compared to the previous year, the result improved by an impressive 32%. Even though the development has not been equally positive in all locations, the majority show a clear upward trend. Berlin ranks first with just under €1.19 billion (+174%), to which the sale of the Upper West (around €400 million) made a significant contribution. The other podium places are occupied by Munich with €648 million (+136%) and Cologne with €525 million (+56%). A very good result was also registered in Hamburg with €496 million (+35%). In contrast, Frankfurt (€233 million; -67%), Düsseldorf (€188 million; -25%) and Stuttgart (€138 million; -38%) suffered revenue losses. The distribution of sales by size class is relatively balanced. It is noteworthy, however, that deals over €100 million more than doubled to €1.18 billion. This also underlines the clearly recognizable market recovery.
Prospects
Although office investment turnover is still far from the long-term averages, a market revival can be observed that is increasingly stabilizing. There are several reasons for this.
In principle, there is a renewed interest in German office real estate on the part of large and, above all, international investors. The continuing rise in prime and average rents plays an important role here, as they open up considerable value appreciation prospects. This applies in particular to the potential of attractive new-build properties that are being introduced to the market.
Currently, this improvement in sentiment is supported by a positive development in the user markets. In the first three quarters, office space take-up in the major German locations increased by more than 3% year-on-year, including Frankfurt with its best result in the last 20 years (+63%). This is also in line with the fact that there are increasing reports that the home office rate is tending to decline somewhat again and that a further increase in this form of work is not foreseeable. Against this backdrop, investor confidence in long-term stable demand for offices seems to be increasing again.
In addition, it has been observed for some time that the long-standing expectation that the price level will rise significantly in the foreseeable future is becoming increasingly less important. Also due to this increasingly changing market assessment, an increase in investment activity can probably be expected in the coming quarters, which should also lead to higher transaction volumes. A large number of properties are already being marketed or are about to be signed.
“The prospects of the markets are determined by a whole range of different influencing factors, the development of which is difficult to predict. The most likely scenario remains that positive effects from national developments occur and are only partially overshadowed by overarching negative trends. Against this backdrop, there is a realistic chance that the upward trend in the markets could continue next year. In terms of yield development, a stable development can be assumed,” explains Franc Gockeln
Link to the market report:
https://www.realestate.bnpparibas.de/marktberichte/buero-investmentmarkt/deutschland-at-a-glance
