The biggest deal in German commercial real estate market in the quarter, as well as in the first six months, was the sale of 71 clinics by a US REIT to France-based Primonial for more than €800 million. This is the first time that a top transaction has taken place outside the established asset classes. The ten largest deals in the first half of the year with volumes of €300 million apiece amounted to almost €4.4 billion in total, accounting for 17% of the transaction result. The importance of very large transactions has therefore declined, which in our view is due more to a lack of such offers, particularly portfolio transactions, than to a reduction in demand. During the second quarter, investors clearly focused on the seven property strongholds, which accounted for about 63% of the total German transaction volume. Of the 20 largest transactions in the period from April to June, only one did not take place in one of the strongholds. The transaction volume in the Big 7 increased significantly by 29% in the first six months compared to the previous year. Transactions fell accordingly in secondary or tertiary cities. The strategy of only investing in top and secondary cities clearly dominates the current market environment.
Berlin and Munich have regularly shared the top spot in recent quarters, but the banking and finance metropolis resumed the leading position by the end of the first half with a transaction volume of at least €3.8 billion and growth of 62% compared to the first half of 2017. This was mainly due to eight transactions with a volume of more than €100 million apiece (including Frankfurt properties in portfolios). Munich (€3.62 billion) and Berlin (€3.18 billion) also exceeded the €3 billion mark. Cologne was the only top 7 city to experience a decline, with a 43% reduction in the transaction volume.
At about €11.4 billion, office properties accounted for around 45% of the transaction volume and remained by far the most dominant usage type. Retail property accounted for a share of almost 18%, while the transaction volume for logistics property stabilised in the double-digit percentage range (11%). Clinics, nursing homes and retirement homes are becoming increasingly established among the various usage types, accounting for approx. €1.6 billion and therefore only just behind hotels and mixed-use properties. Nothing changed in the ratio of foreign to domestic buyers during the second quarter. No salient trends have emerged here in terms of either buying or selling activities among the investor groups. What is undermined at the geopolitical level by punitive tariffs fortunately still functions on the investment market. All possible capital flows can be observed here.
(Source: JLL Investment Market Overview I Germany 2nd quarter 2018)