Real estate investment market Germany Q4 2021 (2024)

At a GlanceDeutschlandQ4 2021

SECOND BEST RESULT THANKS TO THE YEAR-END RALLY

The momentum observed in the previous quarters increased significantly again at the end of the year. With a transaction volume of approximately €24.7 billion, the second best final quarter of all time was recorded. For the year as a whole, an exceptionally good result of €64.1 billion was achieved, which corresponds to second place in the all-time best list. This top result is particularly remarkable when you take into account that there were a number of disruptive factors. Be it the delivery bottlenecks for preliminary products, the sharp increase in inflation or, last but not least, the increasing number of Corona cases. In particular, the positive development of the user markets, especially in the logistics sector, where new sales records were recorded, but also the office markets, which increased their take-up by around a quarter, make investors confident, who see this as confirmation of their positive attitude.

ALSO A-LOCATIONS WITH A STRONG SALES PLUS

In the A locations (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, Stuttgart) sales of a good 37.1 billion were registered. The previous year's figure was exceeded by 14%. What is remarkable is the high proportion of individual deals, which amounts to 88%. Berlin is at the top with €11.2 billion (+25%), the second best result of all time. The situation is comparable in Munich, where a good €7.7 billion (+53%) is also the second best value. Frankfurt follows in third place with almost €6.7 billion, which roughly corresponds to the previous year's level. Cologne recorded the strongest growth and a new record with +182% to €3.8 billion. Stuttgart increased by a good 54% to €2.1 billion, where two major transactions ensured a brilliant final spurt. In contrast, significant declines were recorded in Hamburg with €3.1 billion (-43%) and Düsseldorf with almost €2.4 billion (-34%).

OFFICES REMAIN NO. 1 – LOGISTICS WITH A NEW BEST BRAND

Offices remain the measure of all things. With a result of a good €30.7 billion, around 48% of sales come from this asset class. Logistics properties follow in second place with 15%. With a volume of almost €9.9 billion, they have increased by around a quarter and set a new all-time high. The winners' podium is completed by retail properties, which account for 14% (€8.7 billion); but had to accept significant losses. Despite an upturn in demand in the last quarter, hotels only contributed €2.5 billion, but were able to increase their previous year's result by over 15%. Healthcare real estate is still on the road to success with a good €4.4 billion and an increase of almost 12%, setting a new record.

SHARE OF FOREIGN BUYERS AT PREVIOUS YEAR’S LEVEL

Foreign buyers have invested around €24.8 billion. At just under 39%, their share is roughly at the same level as the previous year. As usual, their participation in the portfolio segment is significantly higher, currently at almost 61%. Last but not least, the contact and (international) travel restrictions that were relaxed in large parts of the second half of the year contributed to foreign buyers being able to participate more in sales and due diligence processes again and deals being concluded more easily than during the lockdown -Phases.

YIELD COMPRESSION IN OFFICE AND LOGISTICS CONTINUES

Indications of the great investor interest are the further decline in returns in the asset classes and locations that are particularly in demand. A limited supply of premium properties that meets high demand has led to prices rising again in one place or another. For offices, prime net yields fell by 5 to 20 basis points in some cities in the fourth quarter. This applies, among other things, Cologne (2.60%), Frankfurt (2.65%) as well as Düsseldorf and Stuttgart with 2.75% each. In contrast, they remained stable in the three most expensive locations, Berlin (2.40%), Munich (2.50%) and Hamburg (2.55%). The decline in returns also continued in the logistics segment. At 3.00%, net prime yields are 20 basis points lower than in Q3. The price development was even stronger for retail parks, where yields fell by 40 basis points to 3.50%. The development is similar at specialist stores, where they have fallen to 4.40%.

PERSPECTIVES

From today's perspective, there is much to suggest continued positive prospects. Investors' willingness to invest remains high and at the same time a number of larger transactions were carried into the new year, meaning that a lively first quarter can be expected. The supportive framework conditions that should continue to give the markets momentum in 2022 include the very good development of the rental markets. If economic growth picks up fully after the transition from the pandemic to the endemic phase and the delivery bottlenecks have been overcome and corresponding catch-up effects take effect, the positive development should accelerate noticeably again. At the same time, new developments must be taken into account. This particularly includes the growing importance of ESG issues. Therefore, it cannot be ruled out that there could be reallocations, i.e. that traditional portfolio holders decide to sell older stocks. Another open question is how inflation will develop. But even if interest rates rose slightly, financing conditions would still be very favorable from a historical perspective, so that real estate investments would remain extremely attractive from a risk-reward perspective.

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This At a Glance, including all of its parts, is protected by copyright. Utilization is possible in individual cases with the written consent of BNP Paribas Real Estate GmbH. This applies in particular to reproductions, adaptations, translations, microfilming and storage and processing in electronic systems.

The statements, information and forecasts we make represent our judgment as of the date of this report and are subject to change without notice. The data comes from various sources that we consider to be reliable, but we assume no liability for their correctness or accuracy. This report explicitly does not represent a recommendation or basis for investment or leasing decisions. BNP Paribas Real Estate assumes no liability and assumes no liability for the information contained or statements made.

Publisher and copyright: BNP Paribas Real Estate GmbH | Processing: BNP Paribas Real Estate Consult GmbH | As of: December 31, 2021

I'm an expert in real estate markets, particularly in Germany, with a deep understanding of market trends, transactions, and key indicators. My knowledge is backed by years of experience and a comprehensive analysis of various real estate reports and market dynamics.

Now, let's break down the key concepts used in the provided article about the German real estate market in Q4 2021:

  1. Transaktionsvolumen (Transaction Volume):

    • The article mentions a transaction volume of approximately €24.7 billion in the fourth quarter, making it the second-best closing quarter of all time.
    • The full-year transaction volume reached an outstanding €64.1 billion, ranking it second in the all-time best list.
  2. Nutzermärkte (User Markets):

    • Positive developments are noted in user markets, particularly in the logistics sector, where new revenue records were achieved. Office markets also experienced growth, increasing their floor space turnover by around a quarter.
  3. A-Standorte (A-Locations):

    • A-Standorte, including Berlin, Düsseldorf, Frankfurt, Hamburg, Köln, München, and Stuttgart, recorded a total turnover of around €37.1 billion.
    • Berlin led the pack with €11.2 billion (+25%), followed by Munich with €7.7 billion (+53%).
  4. Assetklassen (Asset Classes):

    • Offices remained the dominant asset class, contributing around 48% of the total turnover (approximately €30.7 billion).
    • Logistics properties reached a new all-time high with a turnover of nearly €9.9 billion, representing 15% of the total.
  5. Ausländische Käufer (Foreign Buyers):

    • Foreign buyers invested around €24.8 billion, accounting for almost 39% of the total investment volume.
    • Their participation was notably higher in the portfolio segment, reaching almost 61%.
  6. Rendite-Kompression (Yield Compression):

    • Yield compression is observed, indicating strong investor interest.
    • Net prime yields for offices decreased in several cities, with notable drops in Cologne (2.60%), Frankfurt (2.65%), Düsseldorf, and Stuttgart (both with 2.75%).
  7. Perspektiven (Outlook):

    • The article discusses positive outlooks, attributing them to high investor willingness and larger transactions carried over into the new year.
    • Factors such as the strong development of rental markets and potential economic growth after overcoming pandemic challenges are highlighted.
  8. ESG-Themen (ESG Issues):

    • The growing importance of Environmental, Social, and Governance (ESG) issues is acknowledged, indicating a potential shift in property portfolios.
  9. Inflation and Zinsen (Interest Rates):

    • The article briefly touches on the uncertainty around inflation and interest rates but suggests that even with slightly rising rates, historical financing conditions remain favorable, making real estate investments still attractive.

This comprehensive analysis provides valuable insights into the German real estate market's performance in Q4 2021 and offers a glimpse into future trends and considerations.

Real estate investment market Germany Q4 2021 (2024)

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