Investment market Germany - ProPerty rePort 2019 - research - BNP Paribas Real Estate

 
Investment market Germany - ProPerty rePort 2019 - research - BNP Paribas Real Estate
Investment market
Germany
Property Report 2019

                                  Research

                                 Real Estate
                       for a changing world
Contents Investment Market Germany 2019

           Contents
Executive summary.......................................................................................................................................                                         3

Overview of the German investment markets........................................................................................                                                                5

Berlin................................................................................................................................................................ 11

Cologne............................................................................................................................................................. 13

Düsseldorf........................................................................................................................................................ 15

Frankfurt.......................................................................................................................................................... 17

Hamburg.......................................................................................................................................................... 19

Leipzig............................................................................................................................................................... 21

Munich.............................................................................................................................................................. 23

Stuttgart........................................................................................................................................................... 25

           Imprint
Publisher and copyright: BNP Paribas Real Estate GmbH                                                Title: TS Tessuto S.à.r.l
Prepared by: BNP Paribas Real Estate Consult GmbH                                                    Status: January 2019
Realisation: KD1 design agency, Cologne                                                              Circulation: 700

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All rights reserved. This Property Report is protected in its entirety by copyright. No part of this publication may be reproduced, translated, transmitted, or stored in a retrieval system in any
form or by any means, without the prior permission in writing of BNP Paribas Real Estate GmbH.

The statements, notifications and forecasts provided here correspond to our estimations at the time when this report was prepared and can change without notice. The data come from various
sources which we consider reliable but whose validity, correctness or exactness we cannot guarantee. Explicitly, this report does not represent a recommendation of any kind, nor should
it be regarded as forming a basis for making any decisions regarding investment or letting or renting property or premises. BNP Paribas Real Estate can accept no liability whatsoever for any
information contained or statements made herein.
Investment Market Germany 2019 Executive Summary

Executive summary
   Threshold barrier breached: new record turnover of just over 61.5 bn €

   After three very good years, each with a transaction volume of well over 50 bn €, the 60 bn €
   threshold was broken for the first time in 2018, as expected, and a new all-time high was
   set. This extraordinary result was primarily due to investments in single properties, which
   almost pulverised the record set last year.

   Office properties remain the most popular asset class

   ▸▸ The market was dominated by office investments (almost 29.7 bn €). Only in 2007 was
      the volume slightly higher, but this was mainly driven by portfolio transactions. In 2018,
      on the other hand, single office buildings were the main focus of buyers (over 27.1 bn €).
      A total of 65 single transactions in the three-digit million range were recorded.

   ▸▸ S
       econd place went to retail properties, which at 11.2 bn € are slightly above the
      ten-year average.

   ▸▸ Logistics investments with 7.2 bn € remain on course for success.

   ▸▸ H
       otels have also continued the soaring trend that began about four years ago
      (little over 4 bn €).

   Half of turnover is accounted for by major deals

   ▸▸ Contracts in the three-digit million euro range account for a good half of the result.

   ▸▸ F
       oreign investors account for just under 41 % of turnover, continuing the trend
      of a slightly declining share at the end of the year.

   ▸▸ The A-locations, which account for some 38.65 bn € or around 63 % of total
      turnover, were the focus of particular attention. Frankfurt is the undisputed leader
      with 10.23 bn €, resulting in a German location exceeding the 10 billion euro
      threshold for the first time.

   Prices continue to rise

   ▸▸ As expected, premium transactions were concluded in all A-locations in the last quarter,
      with the result that prime net yields for office properties fell once again.

   ▸▸ The logistics markets developed even more dynamically. In the most important
      metropolitan areas, they fell by a further 45 basis points to 4.05 % last year.

   ▸▸ The net prime yields for retail / office buildings in city centre locations, on the other
      hand, have remained stable and average 3.07 %.
Hamburg

                                                                                                                                              Berlin

                                                 Düsseldorf
                                                                                                                                    Leipzig
                                                 Cologne

                                                                        Frankfurt

                                                                                 Stuttgart

                                                                                                                         Munich
                                                                                                                                                                  Investment locations in Germany

Methodology
The transactions covered by BNP Paribas Real Estate in this         the data of the relevant officially appointed expert commit-          instance between companies belonging to the same
survey and the resultant total transaction volume do not            tees. The differences vary between individual cities. There           business group. And these surveys also contain many
represent the entire commercial investment market. The sur-         are several reasons for this:                                         small deals between private persons, such as people
vey takes into account only those investments on which BNP          ▸▸ The committees differ widely in the way they assign               with adjacent sites.
Paribas Real Estate has assured information and which in-              transactions to market segments and also in the depth          ▸▸ Even the use of professional research methods cannot
volve “professional players”, in the widest sense of this term.        of their analyses. Some operate only with catch-all                prevent the proportion of transactions surveyed by BNP
Since the investment market is highly sensitive, with deals of-        terms such as “commercial property”, others go into                Paribas Real Estate from varying between cities or be-
ten being kept confidential, the possibility cannot be excluded        far more detail. In individual cases, the surveys are of a         tween one year and the next. Whether or not the neces-
that some transactions were not revealed and are therefore             quite general nature.                                              sary information is available always depends on the mar-
not included in this survey. In view of all this, the transaction   ▸▸ The data compiled by these committees cover all                   ket players involved and on the wider general situation.
volumes depicted here generally deviate from those shown in            transactions. These include “internal transactions”, for           Often, confidentiality is a contractual condition for a sale.
Investment Market Germany 2019 Overview

             Overview of the German investment markets
   	Sound barrier breached:                                                                  This extraordinary result is primarily due to investments in
     new record turnover of just over 61.5 bn €                                               individual properties, which, at about 46 bn €, almost pul­
After three very good years, each with a transaction volume                                   verised the record figure of just under 39 bn € set last year.
of well over 50 bn €, the 60 bn € threshold was broken for the                                This is also illustrated by the fact that the ten-year average
first time in 2018, as expected, and a new all-time high was                                  was exceeded by an impressive 70 %. As the number of trans-
set. The extraordinary result of the previous year was thus                                   actions recorded was relatively stable compared to the previ-
again exceeded by just under 6 %. Despite lowered GDP fore-                                   ous year, the increase is mainly attributable to an increasing
casts for the next two years and deteriorating sentiment indi-                                number of large transactions. On the other hand, the impor-
cators, investor interest in German real estate remains high.                                 tance of portfolio deals continued to decline. At a little above
Although the growth rates are slightly declining, the economy                                 15.5 bn €, the result in this market segment was 20 % lower
also has good medium-term prospects and solid growth po-                                      than in the previous year. With a share of 25 % of total turno-
tential. In addition, unemployment will continue to fall ac-                                  ver, this also represents its lowest level in the last five years.
cording to current forecasts. The occupier markets are also                                   However, this is not due to a decline in investor interest, but
benefiting from this, which is impressively underlined by the                                 to an insufficient supply. Especially in the segment of large-
current take-up in office space, which at around 4 million m²                                 scale core packages there are too few products, so that the
represents the second-best result of all time. The scenario of                                high demand cannot be met.
high and stable demand coupled with noticeably rising rents
remains intact and offers potential for value appreciation in                                 In addition to investments in commercial properties, a turnover
the coming years.                                                                             of 16.3 bn € was recorded for larger residential investments.

Overview of the investment markets

                                                                                                               Investment volume                                       Change

                                                                                                   2017                              2018                            2017-2018
                                                                                                 (million €)                       (million €)                          (%)

Single investments                                                                                38,856                            46,032                                18.5

- Share of A-locations (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart)       25,046                            33,009                                31.8

Portfolios                                                                                        19,363                            15,504                               -19.9

- Share of A-locations (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart)        5,890                             5,643                                -4.2

Commercial properties total                                                                       58,219                            61,536                                  5.7

Residential portfolios                                                                            14,001                            16,285                                16.3

Investment volume total                                                                           72,221                            77,820                                  7.8

                                                                                                                                                 © BNP Paribas Real Estate GmbH, December 31, 2018

  	Office properties remain the most popular                                                   major deals were registered alone. Prominent examples are
The market was clearly dominated by office investments,                                         the sale of the Omniturm, the Gallileo or the “Bürohaus an
which contributed almost 29.7 bn € or 48 % to the over-                                         der Alten Oper”. But also in Munich (15), Berlin (12) and
all result. Only in 2007 was the volume slightly higher, but                                    Hamburg (7) a whole series of large-unit office transactions
this was mainly driven by large portfolios. In 2018, on the                                     were carried out.
other hand, individual office buildings, which accounted for
more than 27.1 bn €, were the main focus of buyers. A total                                     Following in second place are retail properties, which con-
of 65 individual sales in the three-digit million range were                                    tribute 11.2 bn € (18 %) to turnover. This is slightly above
recorded. The absolute front-runner is Frankfurt, where 19                                      the ten-year average, but at the same time 19 % below the

                                                                                                                                                                                        4|5
previous year’s result. The largest investments were made in                  second-best result of all time. Only in the previous year did
discount stores / supermarkets (4.40 bn €), which continue to                 some very large portfolio sales contribute to even better turn-
be very popular with investors. The same applies to inner-city                over. Only in terms of single properties (3.19 bn €) was it even
retail / office buildings in the absolute prime locations, which              possible to set a new record. Hotels have also continued the
will continue to be indispensable for the brand building of                   high-altitude flight begun about four years ago, although at
large retailers in the future and also make a high contribution               some 4 bn € (6.5 %) they are around 4 % below the previous
to turnover with 2.73 bn €. On the other hand, investors are                  year’s figure. However, the same applies here as for logistics
uncertain about the future development of shopping centres.                   objects: While a new all-time high of 3.2 bn € was achieved
                                                                              in single transactions, turnover in the portfolio segment was
Logistics investments, on the other hand, are still on the road               significantly lower due to supply factors.
to success, reaching 7.2 bn € (12 %) and thus achieving the

Overview of investment in commercial properties

                                         Single investments                   Portfolios                          Total                                       Share

                                       2017            2018          2017               2018          2017                  2018                   2017                   2018
Type of property
                                     (million €)     (million €)   (million €)        (million €)   (million €)           (million €)               (%)                    (%)

Office                                20,189          27,139          3,750                2,545     23,938                29,685                   41.1                   48.2

Retail                                  7,767           6,283         6,042                4,922     13,809                11,205                   23.7                   18.2

Logistics                               2,956           3,193         6,224                4,009       9,179                 7,202                  15.8                   11.7

Hotel                                   3,104           3,201         1,083                  821       4,187                 4,022                    7.2                    6.5

Others                                  4,841           6,215         2,264                3,207       7,105                 9,422                  12.2                   15.4

Total                                  38,856          46,032        19,363                15,504     58,219                61,536                100.0                  100.0

                                                                                                                                        © BNP Paribas Real Estate GmbH, December 31, 2018

  	Many different investor types active                                      resent a large number of different end investors who often
As in recent years, the market has been characterised by a                    invest indirectly in property through these vehicles. The same
great diversity. This becomes particularly clear in the analysis              applies in principle to investment managers, who come third
of the buyer groups involved in investment turnover. Regard-                  with 10 %. In between, on the silver rank, are listed real estate
less of the risk profile, preferred investment volume or pre-                 companies / REITs, which reach just under 13 %. In addition,
ferred asset class, the German real estate markets offer all in-              pension funds (8.5 %), equity / real estate funds and property
vestors attractive investment opportunities due to their good                 developers with almost 8 % each as well as insurance com-
and stable fundamental data. As a result, only three types of                 panies and property firms (both responsible for around 6 %)
investors account for double-digit turnover shares. The top                   made larger contributions of between 5 and 9 %. The eight
performers were special-purpose funds with 22 %, which rep-                   largest buyer groups thus account for only 81 % of turnover.
Investment Market Germany 2019 Overview

Investments by buyer group
    2017 in %, total 58,219 million €                                                                     2018 in %, total 61,536 million €
Special-purpose funds                                                          16.1                 Special-purpose funds                                                                  22.4
Investment / asset managers                                                    14.2                 Listed RE companies / REITs                                                            12.9
Equity / real estate funds                                                     10.6                 Investment / asset managers                                                            10.0
Listed RE companies / REITs                                                     8.3                 Pension funds                                                                           8.5
Property developers                                                             7.6                 Equity / real estate funds                                                              7.9

                                                                                                                                                                                                    © BNP Paribas Real Estate GmbH, December 31, 2018
Pension funds                                                                   7.5                 Property developers                                                                     7.6
Insurance companies                                                             5.9                 Insurance companies                                                                     6.1
Property firms                                                                  5.9                 Property firms                                                                          5.8
Family offices                                                                  4.8                 Open-ended funds                                                                        4.1
Sovereign funds                                                                 4.4                 Corporates                                                                              3.8
Open-ended funds                                                                4.2                 Family offices                                                                          2.7
Private investors                                                               3.8                 Closed-end funds                                                                        2.6
Corporates                                                                      2.5                 Private investors                                                                       2.5
Other investors                                                                 4.2                 Other investors                                                                         3.1

                                    0   5       10                   15   20                                                        0                 5   10   15   20            25

  	half of turnover by major deals                                                                 second place is taken by the second-largest class between 50
Major deals in the three-digit million euro range were able to                                      and 100 m €, which, at just under 19 %, is at the same level
slightly increase the already very high share of the previous                                       as in 2017. In relative terms, only marginal changes can be
year and contribute nearly half to the transaction turnover,                                        observed in the other size classes, too. Basically, all market
thus slightly exceeding the long-term average. As expected,                                         segments benefited from the strong demand.

Investments by € category

                                                                                                                                                                                  31,138
    million € in 2017, total 58,219 million €         million € in 2018, total 61,536 million €

                                                                                                                                                                         28,181
30,000

25,000

                                                                                                                                                                                                    © BNP Paribas Real Estate GmbH, December 31, 2018
20,000
                                                                                                                                                 11,636
                                                                                                                                        10,878

15,000
                                                                                          8,769
                                                                                                  7,964
                                                             7,610
                                                     6,937

10,000
                    3,455
                            3,188

 5,000

     0           < 10 million €             10-< 25 million €                         25-< 50 million €                          50-< 100 million €                 ≥ 100 million €

  	Relative share of foreign investors                                                             In this respect, they currently have slightly fewer investment
    slightly declining                                                                              opportunities, as the supply of high-quality and large-scale
Foreign investors account for just under 41 % of turnover.                                          portfolios is currently not sufficient to fully meet the con-
This means that the trend of the first three quarters con-                                          tinuing high demand. However, the fact that Germany re-
tinued towards the end of the year, with the proportion of                                          mains a preferred investment location for them is shown
foreign buyers declining somewhat in relative terms. This is                                        by the fact that, in absolute terms, they once again gener-
not at least due to the decline in portfolio turnover, as they                                      ated high turnover of around 25 bn €, roughly at the aver-
are generally very active in this field and have high shares.                                       age level of the last five years. European buyers were again

                                                                                                                                                                                                  6|7
the most active, accounting for a share of 20 %. The three                    result. Asian investors are almost on the same level with
most important countries were United Kingdom (5 %), France                    7 %. Fourth place went to buyers from the Middle East, who
(nearly 4 %) and Austria (4 %). As expected, North American                   reached about 4 %.
investors followed in second place, contributing 8 % to the

Investments by origin of capital
   Germany         Europe        North America   Middle East          Asia        Others         Ø Germany

100 %                       4                                                                    5
                                                                                  6                                               10                7
             10             6                     12                                                                                                4
                                        15
 90 %                                                           11                                                14                 4
                                                                                 16              20                                                 8
                                                                                                                                   11
 80 %                       26          16                      15
                                                  26

                                                                                                                                                                  © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                  23                                20
 70 %
                                                                                 21                                                21
                                                                                                 22
 60 %

 50 %
             86
 40 %
                            63          66                      67
                                                  60                                                              57                                59
 30 %                                                                            53              50                                52

 20 %

 10 %

            2009        2010          2011       2012          2013             2014            2015             2016            2017             2018

  	Overview and market data of the major locations                           Second place went to Berlin with 7.43 bn €, the third-best re-
The A-locations (Berlin, Cologne, Düsseldorf, Frankfurt, Ham-                 sult of all time. In the capital in particular, however, demand
burg, Munich, Stuttgart), which account for a little over                     continues to exceed supply. Munich is only marginally beyond
38.65 bn €, or around 63 % of the overall result, were particu-               the all-time high of 2007, where turnover increased by 28 %
larly the focus of attention. This not only exceeded the previ-               to 6.67 bn €. New record results are achieved in Hamburg,
ous year’s result by 25 %, but also set a new record. Frankfurt               with 5.9 bn € (+66 %) which is only the second time with over
is the undisputed leader. At 10.23 bn €, a German location                    5 bn €, Düsseldorf with 3.9 bn € (+21 %) and Stuttgart with
exceeded the 10 bn € threshold for the first time. The new                    2.54 bn € (+81 %). In Cologne, 1.98 bn € is quoted, so that the
record is an impressive 36 % above the previous year’s result.                city only just fails to reach the 2 billion euro hurdle.

Development of investments in the A-locations                                                  Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart

   in million €

2018                                                                                                                                                     38,653

2017                                                                                                                                                     30,936

2016                                                                                                                                                     29,556

2015                                                                                                                                                     31,475
                                                                                                                                                                  © BNP Paribas Real Estate GmbH, December 31, 2018

2014                                                                                                                                                     23,151

2013                                                                                                                                                     18,970

2012                                                                                                                                                     15,416

2011                                                                                                                                                     12,671

2010                                                                                                                                                     11,593

2009                                                                                                                                                      6,148

        0           5,000            10,000      15,000              20,000            25,000           30,000              35,000              40,000
Investment Market Germany 2019 Overview

Overview of investments in the A-locations                                                                  Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart

    in million € in 2017, total 30,936 million €     in million € in 2018, total 38,653 million €

                                                                                                                                                                      7,920
Berlin
                                                                                                                                                                      7,429

                                                                                                                                                                      2,118
Cologne
                                                                                                                                                                      1,981

                                                                                                                                                                      3,233
Düsseldorf
                                                                                                                                                                      3,907

                                                                                                                                                                              © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                                                                      7,502
Frankfurt
                                                                                                                                                                     10,229

                                                                                                                                                                      3,558
Hamburg
                                                                                                                                                                      5,895

                                                                                                                                                                      5,200
Munich
                                                                                                                                                                      6,667

                                                                                                                                                                      1,405
Stuttgart
                                                                                                                                                                      2,543

                0                 2,000                 4,000                   6,000                    8,000                     10,000                   12,000

  	Prices continue to rise                                                             The logistics markets developed even more dynamically.
The extent to which investor interest continues to be strong,                           Here, too, the increased demand, in conjunction with a limited
and that the further development of the major locations in                              supply of high-quality core products, has further increased
particular is viewed positively, is also reflected in the devel-                        investor competition and thus led to a further decline in net
opment of yields. As expected, premium transactions were                                prime yields. In the most important conurbations (Berlin,
concluded in all A-locations in the last quarter, with the re-                          ­Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart),
sult that net prime yields for office properties fell once again                         they fell by a further 45 basis points last year to now 4.05 %.
everywhere. The undisputed leader is now Berlin with 2.70 %,                             Even in Leipzig, where prices are generally somewhat lower,
closely followed by Munich with 2.80 %. But also in Frankfurt,                           the prime net yield has developed comparably and has now
where 2.95 % is currently quoted, the 3 % mark was broken for                            reached 4.50 %.
the first time. Hamburg is no longer far away from this either
and now stands at 3.05 %. New lows have also been reached                               The net prime yields for retail / office buildings in city centre
in Düsseldorf and Cologne, where the value is now 3.15 %.                               locations, on the other hand, have remained stable and av-
The same value is quoted in Stuttgart, which means that the                             erage 3.07 %. Berlin and Munich are the leaders with 2.90 %
Swabian metropolis is at the same level as the two Rhineland                            each, followed by Hamburg with 3.00 % and Frankfurt with
heavyweights for the first time.                                                        3.10 %. Cologne, Düsseldorf and Stuttgart are just behind with

Development of net prime yields                                                            * Ø A-locations (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart)

    Office*         Retail*       Logistics*       Shopping centres        Specialised discount stores              Specialist retail centres

8.00 %

7.00 %
                                                                                                                                                                              © BNP Paribas Real Estate GmbH, December 31, 2018

6.00 %

5.00 %

4.00 %

3.00 %

         2009           2010              2011          2012             2013              2014              2015               2016              2017               2018

                                                                                                                                                                        8|9
3.20 % each. Prime yields for shopping centres also remained        commodities would be more likely to be affected by global
unchanged at 4.00 %, although initial upward trends are             economic downturns. And even in the case of safe government
emerging here. By contrast, there was a decline to 4.50 % in        bonds, yield jumps cannot be expected in an uncertain envi-
retail parks, which remained in strong demand, and to 5.30 %        ronment with many risk factors. For this reason, rising em-
in individual discount stores. In contrast to shopping centres,     ployment, further moderate economic growth and the increas-
yield compression for discount stores is still continuing.          ing importance of the major metropolises also speak in favour
                                                                    of strong investment markets in the coming year. Against this
                                                                    background, all indications make it likely for the 50 billion
  	Outlook for the investment markets                              euro threshold to be significantly exceeded again and that a
At first glance, the German investment markets may appear           transaction volume of between 55 and 60 bn € ­appears re-
to be in surprisingly good shape, but this ultimately reflects      alistic. For yields, stabilisation at the levels achieved is the
the tough conditions that continue to show in favour of real        most likely scenario. However, it cannot be ruled out that in-
estate. Even though uncertainties about international trouble       creasing global uncertainty will further intensify competition
spots have increased, which is of course also reflected in a        for prime properties, which could maintain the pressure on
decline in sentiment indicators, the measurable influencing         yields, especially in light of the fact that no serious interest
factors are the decisive criterion for investors. This is all the   rate hikes are expected in the euro zone in 2019.
more true as possible alternative investments, e.g. equities or
Investment Market Germany 2019 Berlin

       Berlin
  	OFFER PREVENTS EVEN BETTER RESULT                            Investments 2009 to 2018 in Berlin
With a transaction volume of 7.43 bn €, the Berlin invest-             in million €
ment market confirms the outstanding results of recent

                                                                                                                                           8,283

                                                                                                                                                           7,920
                                                                 9,000
years. At the same time, it broke through the 7 billion euro

                                                                                                                                                                    7,429
mark for the third time in its history and achieved the third-   8,000

best result ever. Although turnover in 2017 was about 6 %        7,000

                                                                                                                                                   5,436
higher, the fact that around 56 % more was invested than

                                                                                                                                                                             © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                 6,000
the 10-year average speaks for itself. In a nationwide com-

                                                                                                                                   4,276
                                                                 5,000

                                                                                                                3,848
parison, the capital ranks second behind Frankfurt, where

                                                                                                                          3,589
                                                                                      3,173
the 10.23 bn € hurdle was exceeded for the first time in a       4,000

                                                                                                    2,335
German city. In principle, however, the investment volume        3,000

                                                                             1,348
could have been even higher in Berlin – assuming a larger        2,000
offering. Against this background, it is not surprising that
                                                                 1,000
price levels have continued to rise.
                                                                             2009    2010           2011        2012      2013    2014     2015    2016    2017    2018

  	SEGMENTS ABOVE 50 M € PARTICULARLY STRONG
To a certain extent, the price increase can also be seen         Investments by € category in Berlin
in the growing importance of large-volume transactions.          in %
Since 2011, the share of property transactions starting at
                                                                 100
50 m € has grown to just under 80 %. Once again, the high-
est turnover was achieved with properties above 100 m €
(3.5 bn € or 48 %), which in the previous year generated          80                                                                                47.6
                                                                                           55.8
even more turnover with the sale of the Sony Center for                                                                      ≥100 million €
over 1 bn € (56 %). After the front-runner Frankfurt, Berlin

                                                                                                                                                                             © BNP Paribas Real Estate GmbH, 31. Dezember 2018
                                                                                                                        50-
TWO GROUPS OF BUYERS AT THE TOP                               Investments by buyer group in Berlin
The buy side has traditionally been broadly based, with               in %, foreign investment share 50.1 %
two groups having set themselves somewhat apart in 2018:
special-purpose funds are responsible for most transactions       Special-purpose funds                                                                            26.9

and thus also secure first place in turnover (27 %) ahead         Investment / asset managers                                                                      18.7

of investment / asset managers (19 %). However, the latter        Listed RE companies / REITs                                                                        9.3
                                                                  Pension funds                                                                                      8.7
ultimately conceals a large number of other buyer groups

                                                                                                                                                                              © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                  Property developers                                                                                5.5
with different investment strategies. Listed real estate com-
                                                                  Insurance companies                                                                                5.4
panies / REITs and pension funds each account for around          Property firms                                                                                     4.9
9 %. As in previous years, Berlin is disproportionately popu-     Equity / real estate funds                                                                         4.7
lar with foreign buyers with a share of 50 %. Nationwide,         Open-ended funds                                                                                   4.3
on the other hand, their share is just 41 %. The spectrum         Banks                                                                                              2.6
is also broad among foreign investors: around 19 % of the         Private investors                                                                                  1.9

volume is accounted for by European buyers, 16 % by the           Other investors                                                                                    7.1

North American region and a remarkable 10 % by investors                                             0      5          10      15       20        25       30

from the Middle East.

                                                                  Investments by origin of capital in Berlin
  	PRIME YIELD FOR OFFICES CONTINUES TO DECLINE                  in %
Strong demand led to a further decline in yields in the final
                                                                                          3.4 1.6
quarter. The net prime yield for offices fell by a further 20
basis points to 2.70 %, making Berlin the most expensive
                                                                               9.9
location in Germany, ahead of Munich (2.80 %). This means                                                                                  Germany
that office properties at their peak are listed lower than                                                                                 Europe
retail / office properties in prime locations, which still note       16.0
                                                                                                                                        	North America
at 2.90 %. This clearly reflects expectations regarding the                                                      49.9                      Middle East
further development of office rents: top rents rose by 9 %                                                                              	Asia
over the course of the year and average rents by more than                                                                                 Others
15 %. However, logistics yields have also fallen sharply                           19.2

once again in the last three months, reaching 4.05 % (-45
basis points) in all major locations.

                                                                                                                               © BNP Paribas Real Estate GmbH, December 31, 2018

  	BERLIN REMAINS HOTSPOT
The investment pressure in the Berlin market is still very
high. In view of the flourishing occupier markets, this is        Net prime yields by type of property in Berlin
quite understandable. In addition, hardly any other city in           Office               Retail        Logistics
Germany is said to have a similar development potential.
Against this backdrop, 2019 is likely to be another excit-        10.00 %

ing investment year. However, the continuing shortage of           9.00 %
supply could once again make the capital the number one            8.00 %
investment location. Following the substantial decline in
                                                                                                                                                                             © BNP Paribas Real Estate GmbH, December 31, 2018

                                                                   7.00 %
yields in recent months, stabilisation at the level achieved       6.00 %
seems the most likely scenario in the near future.
                                                                   5.00 %

                                                                   4.00 %

                                                                   3.00 %

                                                                   2.00 %

                                                                   1.00 %

                                                                            2009     2010     2011   2012       2013        2014    2015     2016      2017      2018
Investment Market Germany 2019 Cologne

       Cologne
  	ANOTHER VERY PLEASING RESULT IN 2018                        Investments 2009 to 2018 in Cologne
In 2018, the Cologne investment market repeated the very              in million €
successful results of the last three years and missed the to-
                                                                2,500

                                                                                                                                         2,180

                                                                                                                                                         2,118
tal volume of 2.0 bn € by a very narrow margin. The third-

                                                                                                                                                                  1,981
best result of all times confirms the high level at which the

                                                                                                                                                 1,897
market has levelled off since the record year of 2015 and       2,000

accordingly exceeding the 10-year average by a mar­vellous

                                                                                                                                                                          © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                                 1,335
46 %, although the previous year’s volume was missed            1,500

                                                                                     1,095

                                                                                                                        1,083
by 6 %. It is noteworthy that no fewer than five transac-
tions exceeded the 100 m € mark, which compensated for

                                                                                                 842
                                                                1,000
the comparatively low number of registered transactions

                                                                                                            565
                                                                            520
(55). In addition to the complete sale of Kaufhof as part
                                                                  500
of the merger of Karstadt and Kaufhof and the purchase
of the Maritim Hotel on Heumarkt, the acquisition of the
“Cologneo I” on Deutz-Mülheimer Strasse also influenced                     2009    2010         2011       2012    2013        2014     2015    2016    2017    2018

the result. At around 36 m €, the average volume per deal is
therefore also at a new record level.
                                                                Investments by € category in Cologne
                                                                in %
  	BIG DEALS DOMINATE THE ACTION
                                                                100
The distribution of the volume by size class is consequently
                                                                                          17.5
led by the category over 100 m €, which accounts for 44 % of
the turnover. This is followed by the segment of 50-100 m €      80                                                                               44.4

at a distance, which achieved a total of 510 m € (26 %), an                                                             ≥100 million €
                                                                                          33.8
overall very good result, but nevertheless fell short of the

                                                                                                                                                                          © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                  50-
special-purpose FUNDS CLEARLY TAKE THE LEAD                      Investments by buyer group in Cologne
Special-purpose funds (almost 45 %) take over the top of                 in %, foreign investment share 56.6 %
the buyer groups in the cathedral city by a large margin.
Not only are they responsible for some of the biggest deals          Special-purpose funds                                                                           44.7

of the year, but they also contribute most of the deals (14)         Property firms                                                                                  17.3

across different asset classes. Property firms came in sec-          Property developers                                                                               9.6
                                                                     Insurance companies                                                                               8.7
ond with around 340 m € (a good 17 %). Both achieved

                                                                                                                                                                               © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                     Investment / asset managers                                                                       6.2
record results and put the property developers (almost
­
                                                                     Family offices                                                                                    4.0
10 %) in third place. Around 1.1 bn € – the second-highest
                                                                     Listed RE companies / REITs                                                                       2.2
value after 2007 – comes from abroad. The share of almost            Pension funds                                                                                     2.1
57 % is also the highest of all A-locations.                         Equity / real estate funds                                                                        1.7
                                                                     Open-ended funds                                                                                  1.2
                                                                     Private investors                                                                                 1.0

  	YIELDS FOR OFFICE AND LOGISTICS                                  Other investors                                                                                   1.3

    CONTINUE TO PLUMMET                                                                                0      10          20          30         40          50

Due to continued high demand and a persistently tight sup-
ply, prices for office and logistics properties rose again in
2018. Yields in both asset classes continued to come un-             Investments by origin of capital in Cologne
der pressure, falling by 40 (offices) and 45 (logistics) ba-         in %
sis points respectively. All property types are now at a
new record level, for example 4.05 % for logistics proper-                           1.7

ties. Offices now generate only 3.15 % and, as in most A-                                     5.6
                                                                                     4.4
locations, the yield for offices in Cologne is now lower than                                                                               Germany
                                                                               6.0
for ­retail / office buildings for the first time. Only highstreet                                                                          Europe
properties recorded a stabilisation of yields at the record                                                        43.4
                                                                                                                                           	North America
level of the previous year (3.20 %).                                                                                                        Middle East
                                                                                                                                           	Asia
                                                                                                                                            Others
                                                                               38.9
  	2019 CAN BE ANOTHER SUCCESSFUL YEAR
For the fourth time in a row, the Cologne investment mar-
ket is at a level of around 2 bn € and is still on the road to
success. However, the comparatively low number of trans-
actions and the high significance of the major deals, espe-                                                                      © BNP Paribas Real Estate GmbH, December 31, 2018

cially in 2018, make it clear that this result is not be taken
for granted. Larger investment opportunities are just as
necessary as a sufficient supply of assets in the mid-million        Net prime yields by type of property in Cologne
range for these kinds of spheres to be advanced to again in              Office            Retail          Logistics
2019. Demand from Germany and abroad for a wide variety
of property types continues to exist, and even in an increas-        10.00 %

ingly uncertain geopolitical situation, real estate at German         9.00 %
prime locations is likely to remain a popular investment al-          8.00 %
ternative. Cologne should also benefit from this.
                                                                                                                                                                                       © BNP Paribas Real Estate GmbH, December 31, 2018

                                                                      7.00 %

                                                                      6.00 %

                                                                      5.00 %

                                                                      4.00 %

                                                                      3.00 %

                                                                      2.00 %

                                                                      1.00 %

                                                                            2009       2010     2011   2012   2013        2014      2015       2016      2017      2018
Investment Market Germany 2019 Düsseldorf

       Düsseldorf
  	DüSSELDORF MARKET WITH BRILLIANT RESULT                         Investments 2009 bis 2018 in Düsseldorf
In 2018, the Düsseldorf investment market is taking an-                  in million €

                                                                                                                                                                        3,907
other step up its record chase: with a transaction volume
                                                                   4,000
of 3.9 bn €, the previous record value of the year before is

                                                                                                                                                               3,233
                                                                                                                                              3,177
being pulverised (+21 %). Individual deals accounted for al-       3,500
most 2.8 bn € or 71 % of total turnover, which impressively
                                                                   3,000
underscores Düsseldorf’s attractiveness as an investment

                                                                                                                                                                                 © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                                                      2,345
                                                                                                                                      2,161
                                                                                                                             2,078
location. Interestingly, with around 120 registered deals,         2,500

slightly fewer properties were traded than in the previous         2,000
year. On the other hand, a new all-time high was achieved

                                                                                        1,188
                                                                   1,500
in terms of average turnover per transaction. Portfolios in-

                                                                                                      954

                                                                                                                 832
                                                                               793
cluded on a pro rata basis also made a significant contribu-       1,000

tion to this, generating total turnover of 1.1 bn €. This is the
                                                                     500
third-highest figure ever measured and an increase of good
two thirds over the previous year’s result.                                    2009    2010           2011       2012     2013       2014     2015    2016     2017    2018

  	TRANSACTIONS OVER 100 M € DOMINATE                              Investments by € category in Düsseldorf
As expected, the distribution of turnover by size class shows      in %
a clear dominance of major transactions over 100 m €,
                                                                   100
which account for a marvellous 1.6 bn € or 41 % of total
turnover. By way of comparison, the figure for the previ-                                    26.4

ous year was less than 900 m €. But the middle price class          80
                                                                                                                                                       40.9

has a significant contribution towards the total turnover as                                                                 ≥100 million €
well. The size classes between 25 and 100 m € together                                       22.1

                                                                                                                                                                                 © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                        50-
SPECIAL-PURPOSE FUNDS DOMINANT BUYERS                          Investments by buyer group in Düsseldorf
The investor ranking is led by the special-purpose funds               in %, foreign investment share 37.7 %
and the equity / real estate funds, which together account
for some 38 % of the transaction volume. The invest-               Special-purpose funds                                                                       21.0

ment / asset managers, who show a striking preference              Equity / real estate funds                                                                  17.2

for large-volume deals starting at 100 m €, also achieve a         Investment / asset managers                                                                 10.6
                                                                   Property firms                                                                                9.1
double-digit share of turnover. All other groups of buyers

                                                                                                                                                                         © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                   Property developers                                                                           7.3
together contribute about 51 % to the overall result. This
                                                                   Pension funds                                                                                 7.0
shows that the supply of commercial real estate in Düssel-         Listed RE companies / REITs                                                                   6.5
dorf meets a broadly diversified demand and that there are         Public sector                                                                                 5.9
no dependencies on specific buyer groups. Regarding the            Open-ended funds                                                                              5.0
origin of the investors, it is noticeable that the share of for-   Family offices                                                                                3.3

eign investors is comparatively low at 38 %. Investors from        Non-profit institutions                                                                       2.7

other European countries (17 %) and North America (10 %)           Other investors                                                                               4.4

were particularly keen to buy.                                                                      0      5        10          15         20          25

  	YIELD COMPRESSION CONTINUES TO GROW                            Investments by origin of capital in Düsseldorf
The ongoing low-interest policy of the central banks and           in %
the continuing investment urgency for institutional inves-
                                                                                     1.5 3.2
tors are maintaining the pressure on yields in all asset
classes. In the office segment in particular, broad demand
                                                                                    6.3
meets scarce supply, resulting in a 35 basis point decline                                                                            Germany
in the net prime yield to 3.15 %. The situation is similar for            10.1                                                        Europe
logistics, which at their peak stand at a yield of 4.05 %, 45                                                                        	North America
basis points less than a year ago. However, the sharp de-                                                                             Middle East
cline in yields for office and logistics properties is not only         16.6                                                         	Asia
                                                                                                           62.3
due to the tense competitive environment, but also reflects                                                                           Others
continued positive rent expectations. The situation is some-
what different for inner-city retail/office buildings: here, the
net prime yield developed sideways at a low level of 3.20 %.

                                                                                                                           © BNP Paribas Real Estate GmbH, December 31, 2018

  	OUTLOOK FOR 2019 REMAINS POSITIVE
Towards the end of the year, there were increasing signs
of a slight slowdown in the economy and the turnaround             Net prime yields by type of property in Düsseldorf
in interest rates in the USA was also casting its shadow               Office             Retail        Logistics
ahead. The overall economic environment remains stable,
the overall trend towards urbanisation will continue, and          10.00 %

there should be no significant changes in investors’ invest-        9.00 %
ment preferences or the lack of alternative investment op-          8.00 %
portunities. To this extent, turnover above the 3 billion euro
                                                                                                                                                                                © BNP Paribas Real Estate GmbH, December 31, 2018

                                                                    7.00 %
mark in 2019 with a simultaneous stabilisation of yields at         6.00 %
a low level also appears to be realistic.
                                                                    5.00 %

                                                                    4.00 %

                                                                    3.00 %

                                                                    2.00 %

                                                                    1.00 %

                                                                             2009   2010     2011   2012   2013     2014      2015      2016       2017      2018
Investment Market Germany 2019 Frankfurt

       Frankfurt
  	INVESTMENT TURNOVER REACHES NEW DIMENSION                    Investments 2009 to 2018 in Frankfurt
With a transaction volume of 10.23 bn €, the Frankfurt                in million €
investment market has not only set a new all-time high,
                                                                12,500
but has also broken through a barrier: never before has

                                                                                                                                                                         10,229
an annual turnover in the double-digit billion range been
achieved in a German city. So it is no surprise that the        10,000

                                                                                                                                                                 7,502
banking metropolis leads the nationwide rankings ahead of

                                                                                                                                                                                   © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                                                      6,692
Berlin and Munich. The already very good result of the pre-

                                                                                                                                              6,016
                                                                 7,500

                                                                                                                                 5,318
vious year was again increased by more than 36 %. Many
large-volume sales of office properties are also responsible

                                                                                                                         3,893
                                                                 5,000

                                                                                                               3,230
for this result. These include the Omniturm, the Gallileo,

                                                                                                   2,967
the Junghof Plaza, the Eurotheum and the ”Bürohaus an

                                                                                     1,883
                                                                 2,500
der Alten Oper”. This result shows that large professional

                                                                            744
investors in particular are counting on a positive develop-
ment of the office market. The assessment that Frankfurt                    2009    2010           2011        2012      2013    2014         2015    2016       2017    2018

will benefit from a possible Brexit is also likely to play a
certain role.
                                                                Investments by € category in Frankfurt
                                                                in %
   CLEAR DOMINANCE OF THE MAJOR DEALS
                                                                100
The traditionally important major deals in Frankfurt have
once again noticeably increased their significance in 2018.
Transactions in the three-digit million range accounted for      80                       45.5
some two thirds of the transaction volume, 22 percentage                                                                  ≥100 million €
                                                                                                                                                       67.7
points more than in the previous year. In absolute terms

                                                                                                                                                                                   © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                       50-
FIVE BUYER GROUPS WITH DOUBLE-DIGIT SHARES                   Investments by buyer group in Frankfurt
The diversification of the turnover amongst different inves-         in %, foreign investment share 45.0 %
tors underlines that there is a broad consensus regarding
the expected positive market development in Frankfurt. A         Pension funds                                                                              15.3

total of five groups of buyers have a double-digit share of      Listed RE companies / REITs                                                                14.0

turnover, which is equivalent to an investment volume of at      Insurance companies                                                                        12.4
                                                                 Open-ended funds                                                                           10.4
least 1 bn €. In first place are pension funds with 15 %, fol-

                                                                                                                                                                      © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                 Special-purpose funds                                                                      10.1
lowed by listed real estate companies / REITs with 14 % and
                                                                 Equity / real estate funds                                                                   9.1
insurance companies with some 12 %. In addition, open-
                                                                 Closed-end funds                                                                             6.8
ended funds and special-purpose funds each contribute            Investment / asset managers                                                                  5.5
around 10 %. Above all, the great commitment of core in-         Property developers                                                                          4.3
vestors with a long-term focus is pleasing, and can be seen      Family offices                                                                               3.7
as a sign of confidence in the banking metropolis. The share     Property firms                                                                               3.1

of foreign investors is 45 %, slightly lower than in recent      Other investors                                                                              5.3

years. Asian buyers have invested the most (17 %).                                               0        5             10            15            25

  	YIELDS FURTHER DECREASED IN SOME CASES                        Investments by origin of capital in Frankfurt
The good market performance in conjunction with the posi-        in %
tive outlook for Frankfurt has led to a further decline in net
                                                                                          1.5
prime yields for some asset classes. For office properties,
they fell below the 3 % mark for the first time in the last                         7.5
quarter of 2018 and currently stand at 2.95 %. Frankfurt                    8.4                                                     Germany
now belongs together with Berlin and Munich to the Ger-                                                                             Europe
man trio with an office prime yield of just below the 3 %            10.6                                                        	North America
mark. This development was supported by foreseeable in-                                                                             Middle East
                                                                                                          55.0
creases in rental prices and thus also in value. Top yields                                                                      	Asia
for logistics have also continued to fall and stand now at                 17.0                                                     Others
4.05 %. The corresponding value of 3.10 % for inner-city re-
tail / office buildings remained unchanged.

   FRANKFURT IN THE FOCUS OF INVESTORS 2019                                                                             © BNP Paribas Real Estate GmbH, December 31, 2018

From today’s perspective, there is every reason to believe
that Frankfurt will continue to be the focus of buyers’ at-
tention in 2019 and that strong demand from both German          Net prime yields by type of property in Frankfurt
and international investors is to be expected. However, the          Office           Retail         Logistics
probability of another double-digit billion euro turnover is
relatively low. This is due to the fact that a large number of   10.00 %

large office properties were sold last year. Nevertheless, a      9.00 %
transaction volume is developing that should be at least in       8.00 %
the range of the five-year average. In connection with the
                                                                                                                                                                            © BNP Paribas Real Estate GmbH, December 31, 2018

                                                                  7.00 %
foreseeable rent increases and a narrowing supply, it can-        6.00 %
not be ruled out that competition for premium properties
                                                                  5.00 %
will continue to increase and that the pressure on yields
                                                                  4.00 %
will continue.
                                                                  3.00 %

                                                                  2.00 %

                                                                  1.00 %

                                                                        2009      2010    2011   2012   2013     2014        2015    2016       2017      2018
Investment Market Germany 2019 Hamburg

       Hamburg
  	NEW RECORD VOLUME                                            Investments 2009 to 2018 in Hamburg
The Hamburg investment market achieved an absolute re-                in million €

                                                                                                                                                                         5,895
cord volume in 2018. With 5.90 bn €, more was invested
                                                                6,000
than ever before. Compared with the previous year, this

                                                                                                                                                      4,742
represents an increase of 66 %, and the ten-year average
                                                                5,000
was even exceeded by an impressive 83 %. Only in the boom

                                                                                                                                             3,983
                                                                                                                                3,824
year of 2007 was the 5 billion euro mark exceeded before.

                                                                                                                                                                3,558

                                                                                                                                                                                  © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                4,000
In contrast to 2007, however, primarily individual deals

                                                                                                                        2,674
made this exceptionally high result possible. The propor-

                                                                                                 2,187
                                                                3,000

                                                                                                             2,164
tion of portfolio sales included only reached 16 % (2007:

                                                                                     1,998
63 %). After a strong start, the market really grew consid-     2,000

                                                                            1,098
erably in the second half of the year, and in the last two
quarters alone generated a higher volume than in 2017 as        1,000
a whole. In a nationwide comparison, Hamburg ranks fourth
behind Frankfurt (10.23 bn €), Berlin (7.43 bn €) and Mu-                   2009    2010         2011        2012      2013     2014         2015    2016       2017    2018

nich (6.67 bn €).

                                                                Investments by € category in Hamburg
    HIGH NUMBER OF LARGE VOLUME DEALS                           in %
The extraordinarily high number of large-volume transac-
                                                                100
tions played a significant role for this strong result. Alone
16 properties in the three-digit million range changed                                    29.0
hands. First and foremost is the sale of the Springer            80                                                                                   45.0
Quartier in the first quarter, which had an impact of ap-                                                               ≥100 million €
proximately 400 m €. The size class distribution reflects

                                                                                                                                                                                  © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                     50-
special-purpose FUNDS INVEST THE MOST                         Investments by buyer group in Hamburg
The distribution of the volume among the buyer groups is led          in %, foreign investment share 26.3 %
by special-purpose funds, which were very active in Ham-
burg as well as nationwide. With some 24 %, they are at the       Special-purpose funds                                                                           24.1

top of the ranking by a wide margin. Pension funds acquired       Pension funds                                                                                   13.9

only a small number of large-volume properties, reach-            Listed RE companies / REITs                                                                     12.8
                                                                  Property developers                                                                               9.1
ing just under 14 %. Listed real estate companies / REITs

                                                                                                                                                                            © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                  Investment / asset managers                                                                       8.6
also account for a double-digit percentage (13 %). Property
                                                                  Insurance companies                                                                               7.2
developers secured numerous properties and potential de-
                                                                  Equity / real estate funds                                                                        6.7
velopment sites and follow with approx. 9 %. The propor-          Private investors                                                                                 6.2
tion of foreign investors is some 26 %, well below the high       Corporates                                                                                        5.2
level of the previous year (46 %). In the other major invest-     Property firms                                                                                    3.5
ment locations, much higher values of around 35 % to 57 %         Non-profit institutions                                                                           0.7

are achieved. European investors account for 16 %, North          Other investors                                                                                   2.0

American investors for 7 % and Asian investors for just be-                                            0          5      10        15          20         25

low 3 %.

                                                                  Investments by origin of capital in Hamburg
   	OFFICE YIELDS ALMOST AT RETAIL HIGHSTREET LEVEL               in %
After the net prime yield for office buildings had stabilised
                                                                                          2.8
in the last few quarters, it fell again by 10 basis points at
the end of the year and now stands at 3.05 %. This almost                           7.1
reaches the same level as the prime yield for office / retail
properties, which remain unchanged at 3.00 %. This makes                16.4                                                             Germany
Hamburg one of the most expensive retail locations in                                                                                    Europe
Germany after Berlin and Munich (2.90 % each). Prices for                                                                               	North America
first-class logistics also continued to rise as a result of the                                                                         	Asia
significant increase in demand. With 4.05 %, the prime yield
has fallen by a total of 45 basis points in several steps over                                             73.7

the last twelve months.

   PERSPECTIVES                                                                                                               © BNP Paribas Real Estate GmbH, December 31, 2018

The Hamburg investment market achieved a brilliant result
in 2018, which was also made possible by a whole series
of deals in the three-digit million range. For the current        Net prime yields by type of property in Hamburg
year, the overall signs remain very good. Provided that the           Office              Retail             Logistics
economic environment is not disturbed by external influ-
ences, a further positive development can be expected. As         10.00 %

investment alternatives are still scarce and rental markets        9.00 %
are flourishing, demand on the real estate markets should          8.00 %
remain high in all segments. The order of magnitude of the
                                                                                                                                                                            © BNP Paribas Real Estate GmbH, December 31, 2018

                                                                   7.00 %
overall result for the hanseatic city also depends to a large      6.00 %
extent on a sufficient supply of large-volume products.
                                                                   5.00 %
Generally, however, a clearly above-average investment
                                                                   4.00 %
volume is expected again.
                                                                   3.00 %

                                                                   2.00 %

                                                                   1.00 %

                                                                            2009    2010        2011       2012   2013   2014     2015       2016      2017 2018
Investment Market Germany 2019 Leipzig

       Leipzig
  	OFFER LIMITS INVESTMENT TURNOVER                               Investments 2009 to 2018 in Leipzig
In 2018, the Leipzig investment market was not quite able               in million €

                                                                                                                                                  1,158
to match the high dynamics of previous years and, with a
                                                                  1,200
transaction volume of 800 m €, recorded a decline of some

                                                                                                                                                                    1,017
21 % compared with the previous year. A look at the long-

                                                                                                                                                            919
                                                                  1,000
term average, which was exceeded by around 35 %, shows

                                                                                                                                                                            800
just how good the result is. The decline should therefore not

                                                                                                                                                                                    © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                   800
be seen as an indication of a lack of investor interest. On the

                                                                                                              549
contrary, the supply side – especially in the large-volume

                                                                                                   516

                                                                                                                                      516
                                                                   600
core segment – is so limited that the high demand could
not be met by far. With 58 registered sales, not only were         400

                                                                                                                          256
noticeably fewer properties traded than in the past three

                                                                                       101
years, but the average purchase volume also fell by 13 %           200

                                                                               90
to 14 m €. Among the most significant sales were two indi-
vidual retail deals: in Leipzig-Grünau the 40,000 m² Allee-                   2009   2010      2011          2012        2013        2014        2015      2016    2017     2018

Center was sold, in Großpösna the Pösna Park (57,000 m²).

                                                                  Investments by € category in Leipzig
  	DECLINING SHARE OF MAJOR DEALS                                 in %
The main reason for the lower investment volume is the
                                                                  100
significantly lower result from major deals. The share of
the size class above 50 m € fell by 12 percentage points                                                                                                    31.1
to 31 %. All other categories, on the other hand, recorded         80                       43.1

percentage growth, resulting in a very balanced picture
in Leipzig with two-digit values in all size segments. In

                                                                                                                                                                                    © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                            ≥50 million €
                                                                   60
particular, the two medium-sized volume classes of 10 to                                                             25-
WIDE RANGE OF ACTIVE BUYERS                                    Investments by buyer group in Leipzig
The list of buyers shows a relatively wide dispersion across          in %, foreign investment share 37.2 %
the different investors. A total of five buyer groups reach
double-digit turnover shares and together generate over           Special-purpose funds                                                                      21.8

73 % of the volume. Special-purpose funds, which account          Investment / asset managers                                                                16.4

for around 22 % of turnover, have taken the lead. Invest-         Property developers                                                                        12.9
                                                                  Equity / real estate funds                                                                 12.3
ment managers (16 %) and the property developers already

                                                                                                                                                                       © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                  Property firms                                                                             10.0
mentioned (just under 13 %) rank behind on the other two
                                                                  Corporates                                                                                   8.0
podiums. The top quintet is completed by equity / real es-
                                                                  Listed RE companies / REITs                                                                  6.3
tate funds (approx. 12 %) and property firms (10 %). At 37 %,     Family offices                                                                               3.4
the proportion of foreign investors is the lowest value since     Pension funds                                                                                3.3
2013 and is also slightly lower than in the rest of Germany       Private investors                                                                            2.8
(around 41 %).                                                    Closed-end funds                                                                             1.6
                                                                  Other investors                                                                              1.2

                                                                                                  0      5        10          15          20         25

  	YIELDS HAVE CONTINUED TO DECLINE
The continuing favourable financing conditions with a lim-
ited supply and at the same time high investor interest also      Investments by origin of capital in Leipzig
lead to a noticeable yield compression in the trade fair city.    in %
Nevertheless, the Saxon metropolis has a moderate price
                                                                                      2.6 1.5
level compared to the A-locations. While the prime yield for
retail / office buildings in the best locations remained stable
at 4.20 %, it fell by 30 basis points to 4.30 % for premium
properties in the office segment over the past 12 months.                                                                           Germany
In the logistics sector, it fell even more sharply to 4.50 %.         33.1
                                                                                                                                    Europe
The continuing yield compression speaks for the increasing                                                                          Middle East
maturity and stability of the Leipzig investment market.                                                                           	Asia
                                                                                                         62.8

  	GOOD PROSPECTS FOR 2019
The consistently high transaction volumes of the last four
years – all of which exceeded the long-term average – as
well as the overall broad buyer structure speak for them-                                                                © BNP Paribas Real Estate GmbH, December 31, 2018

selves: Leipzig has established itself as an investment lo-
cation. In addition to the well-frequented city centre and
the dynamic office market, the Leipzig logistics region, as       Net prime yields by type of property in Leipzig
a growing transport hub, also has good framework condi-               Office           Retail         Logistics
tions. In terms of portfolio diversification in particular, the
trade fair city can be a worthwhile alternative to other Ger-     10.00 %

man cities thanks to its more attractive yield opportuni-          9.00 %
ties. Strong demand is therefore also foreseeable for 2019.        8.00 %
Whether this is reflected in a repeatedly disproportionately
                                                                                                                                                                       © BNP Paribas Real Estate GmbH, December 31, 2018

                                                                   7.00 %
high investment volume essentially depends on the supply           6.00 %
side. This could once again turn out to be a bottleneck and
                                                                   5.00 %
thus maintain the pressure on yields.
                                                                   4.00 %

                                                                   3.00 %

                                                                   2.00 %

                                                                   1.00 %

                                                                            2009   2010    2011   2012   2013     2014      2015       2016      2017      2018
Investment Market Germany 2019 Munich

       Munich
  	NEW RECORD TURNOVER WITH SINGLE DEALS                        Investments 2009 to 2018 in Munich
The investment market continued to accelerate in the last              in million €
quarter and generated a turnover of 6.67 bn € for 2018 as

                                                                                                                                                                      6,667
                                                                                                                                                      6,373
                                                                 7,000
a whole. The previous year’s result was again exceeded by

                                                                                                                                              6,001
28 %, the ten-year average even by 52 %. Even the record

                                                                                                                                      5,347

                                                                                                                                                              5,200
                                                                 6,000
level of 2007, which is primarily attributable to large port-

                                                                                                                             4,740
folio transactions, was only marginally missed by a few          5,000

                                                                                                                                                                               © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                3,624
million euros. In terms of individual sales, which account
                                                                 4,000
for 5.81 bn €, the Bavarian state capital has set a new re-

                                                                                                    2,877
cord. In a nationwide comparison, Munich ranks third be-         3,000

                                                                                      1,720
hind Frankfurt and Berlin. The unusually good result was

                                                                             1,327
                                                                 2,000
due not least to many large-volume transactions in the
three-digit million euro range, of which a total of 20 were      1,000
registered. Among the most important are the sales of the
Correo Quarter, the Atlas and the Oscar.                                     2009    2010           2011        2012      2013       2014     2015    2016    2017    2018

  	GOOD DEMAND IN ALL SIZE CLASSES                              Investments by € category in Munich
Although just under 52 % of the investment volume is ac-         in %
counted for by contracts worth more than 100 m €, which is
                                                                 100
somewhat above average for Munich, the other size classes
have also benefited from the strong demand. This applies,
for example, to properties between 50 and 100 m €, which          80
                                                                                           41.3
                                                                                                                                                       51.9
increased their share to some 24 % and generated almost                                                                      ≥100 million €
500 m € more turnover in absolute terms than in the previ-

                                                                                                                                                                               © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                                                                        50-
MANY DIFFERENT BUYERS ACTIVE                                 Investments by buyer group in Munich
Traditionally, the Munich investment market has been                 in %, foreign investment share 34.7 %
the focus of attention for many different investors, which
was again confirmed in 2018. A total of four buyer groups        Special-purpose funds                                                                  16.5

achieved double-digit shares. At 16.5 %, special-purpose         Property developers                                                                    15.6

funds ranked first, followed by property developers at just      Pension funds                                                                          14.0
                                                                 Investment / asset managers                                                            12.4
under 16 %. This shows that the shortage of space is lead-

                                                                                                                                                                  © BNP Paribas Real Estate GmbH, December 31, 2018
                                                                 Insurance companies                                                                      8.2
ing to a significant increase in development planning, es-
                                                                 Banks                                                                                    5.9
pecially in the office market. The management quartet is
                                                                 Open-ended funds                                                                         5.5
completed by pension funds (14 %) and investment manag-          Family offices                                                                           5.2
ers (slightly over 12 %). In addition, insurance companies       Equity / real estate funds                                                               4.9
still contribute a good 8 %. At just under 35 %, the propor-     Private investors                                                                        3.7
tion of foreign buyers is slightly higher than in the previous   Closed-end funds                                                                         2.8

year, but once again confirms the usually low proportion of      Other investors                                                                          5.3

international investors compared with the rest of Germany.                                       0        5         10            15            20

  	PRICES HAVE INCREASED AGAIN                                  Investments by origin of capital in Munich
Together with Berlin, Munich has long established itself as      in %
the most expensive location, which also reflects the confi-
                                                                                     0.6 2.2
dence of investors. Due to the very good take-up of space
in the office markets, competition for core properties has                         5.6
continued to increase and net prime yields have fallen once                 7.8                                                 Germany
again. At the end of 2018 they were quoted at 2.80 % for                                                                        Europe
office buildings. Only in Berlin is the comparative value 10                                                                 	North America
basis points lower. The development of logistics properties          18.5                                                       Middle East
was similarly dynamic. Due to high demand, prime yields in                                                                   	Asia
                                                                                                        65.3
this segment fell to 4.05 %. On the other hand the yield for                                                                    Others
inner-city retail / office buildings stands at 2.9 %, dropping
even lower in individual cases.

  	DEMAND REMAINS HIGH IN 2019 AS WELL                                                                             © BNP Paribas Real Estate GmbH, December 31, 2018

The very good overall economic situation, a growing popu-
lation and foreseeable rent increases are the general condi-
tions that will make Munich one of the most sought-after         Net prime yields by type of property in Munich
destinations for both German and international investors             Office           Retail         Logistics
in 2019. Even though the transaction volume is ultimately
largely determined by the available offer, there are many        10.00 %

indications that the result will again be above average.          9.00 %
The probability of exceeding the 6 billion euro mark for the      8.00 %
fourth time in five years is very high from today’s perspec-
                                                                                                                                                                       © BNP Paribas Real Estate GmbH, December 31, 2018

                                                                  7.00 %
tive. It remains to be seen whether yields have bottomed          6.00 %
out or, in some cases, remain under pressure, depending
                                                                  5.00 %
on external factors such as possible interest rate hikes or
                                                                  4.00 %
increasing uncertainty due to global crises.
                                                                  3.00 %

                                                                  2.00 %

                                                                  1.00 %

                                                                         2009     2010    2011   2012   2013     2014    2015     2016      2017       2018
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