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Hamburg real estate market 2015 closed with a new record

Transaction volume soared high to EUR 4 billion. Optimistic outlook for 2016

The figures were only higher in 2007. This represented a 10 per cent increase over the previous year. “With a volume of EUR 850 million, the fourth quarter was not quite as good as the second and third quarters with back to back results of EUR 1.2 billion. However, these figures were essentially due to portfolio sales of a size not seen in the last quarter of the year,” said Axel Steinbrinker, Managing Director of Grossmann & Berger, commenting on the market situation.

Making big strides in 2015: City South and St. Georg

Investors concentrated on the central sub-markets of City, City South/St. Georg and HafenCity. These sub-markets accounted for over half of the total volume of transactions. The lion’s share of 30 per cent went to City, where 35 properties with a total value of EUR 1.2 billion were traded. The first-quarter sale of Section C of the former Axel Springer headquarters, bought for EUR 130.6 million by the Free and Hanseatic City of Hamburg for the Borough Council of Hamburg-Mitte (Caffamacherreihe 3), was the biggest transaction of the year in the City sub-market. City South/St. Georg came second with around 20 per cent of total turnover. In 2014, this sub-market accounted for only 10 per cent of the volume traded. But in 2015, more than 20 property transactions were completed.

The district was also the scene of 2015’s biggest single sale when Morgan Stanley sold the “Berliner Tor Center” (Beim Strohhause 17-31) office complex for EUR 270 million to the Zurich Versicherung insurance company. The largest transaction in the fourth quarter was also in City South/St. Georg. The “SonninKontor” project development (Nordkanalstrasse 22+24), now under construction and pre-let to four tax offices, was sold by the developer Aug. Prien to the R+V insurance group for a double-digit million figure.

Portfolio sales accounted for 30 per cent of transaction volumes

As in 2014, office properties accounted for 66 per cent of the total traded assets. Portfolio trades valued at some EUR 1.2 billion made up about 30 per cent of the total volume compared to only EUR 430 million in 2014. Four sizeable office property packages were sold in 2015. In the second quarter, for example, Standard Life acquired the “Lilli Portfolio”, which included the Hamburg properties “Deichtorcenter”, “Hanse Forum” and “Hansa Carree”. Credit Suisse sold three office buildings in Hamburg from its “Odin Portfolio” to Orion Capital In the third quarter, GE Capital sold its Germany portfolio, which included three office buildings in Hamburg, to Kildare Partners, a private equity company from Britain.

Together with Norrporten’s package sale of three properties in HafenCity to Pembroke, these four portfolio transactions alone come to around EUR 600 million.

Huge investments in hotels

Last year, some EUR 540 million was invested in hotel real estate compared to EUR 250 million in 2014. One of the major hotel transactions was the sale of the “Radisson Blue” at Dammtor (Marseiller Strasse 2, Alster West), bought back by Azure Hotels from Invesco for a three-digit million figure. Retail properties were the third most popular asset class, accounting for 7 per cent of the transaction volumes.

Yields at all-time Low

Year on year, Hamburg saw premium returns decline appreciably to the lowest levels registered to date. The yield for office and retail assets fell from 4.5 to 4.0 per cent and for warehousing, logistics and industrial assets from 6.9 to 4.0 per cent. High demand and steady rents on the Hamburg market, allied with increasing interest from international players and the ongoing favourable conditions for property loans combined to compress yields.

International players very active

In 2015, international players took greater interest in the market for investments in commercial real estate in Hamburg than national investors, and accounted for about 57 per cent of the total volume of transactions. Most of the investors came from Britain, France and Switzerland.

Among investors, the biggest single group was comprised of open-end/specialist funds with a share of some 25 per cent (about EUR 1.0 billion) of the transaction volume. Asset managers/portfolio holders took the second-highest share with EUR 560 million or 14 per cent of the total. Among vendors, open-end/specialist funds were also the most active group, selling commercial real estate in Hamburg for around EUR 1.3 billion, and accounting for the biggest share (32 per cent) of the transaction volume. Developers and builders followed in second place with a share of some 14 per cent (EUR 572 million).

Outlook for 2016

“The investment environment is set to remain favourable in 2016. However, it is rather unlikely that the volume of transactions will continue on a record-breaking track because there is a shortage of suitable investment properties for sale. We would expect to see the volume of transactions close at a figure somewhere between the totals for 2014 and 2015,” says Steinbrinker.

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