Catella: Positivo l’ Outlook per il Real Estate in Germania

by  Thomas  Beyerle,

Managing Director, Catella Property Valuation GmbH


It would be wrong not to regard 2017 as an exceptionally good year for real estate.

In the last few days, we have added the last deals, transactions and rents into our database, drawn a line underneath and summed it all up. And our result is truly a very positive one.

The year 2017 brought us record at the Top 7 locations in

–          Floor space turnover; 4.19 million sqm rented office space

–          Transaction volume; EUR 57.4 bn €, office share 41%, followed by retail 21%

Also, high figures in

–          Prime rents; at an average of 29.37 €/sqm, an increase of approx. 4.0%

–          Prime yields; at approx. 3.30% these have further decreased and are reaching their all-time low.

The vacancy rate also decreased in all Top 7 markets by a total of one percentage point and was at 4.7% by the end of the year, even though there is a broad range between Frankfurt (8,9%) and Stuttgart (2,3%).

For 2018, we expect:

–          A similarly high floor space turnover, even if the strong focus on CBDs up to now is shifting towards outskirts/arterial roads/development areas.

–          A significant decline of vacancy due to a strong take-up as well as refurbishment activities (including repurposing for residential use).

–          A slight increase of prime rents in the new-build/first-time occupancy segment (+1.5%), for 2018 – the excellent economic development will be noticed in existing properties, where the average rents will increase by approx. 2.5% in new contracts or contract extensions (after refurbishment).

–          A slight decrease in transaction volume; reasons are: extended Due Diligence phases, shifts toward portfolios and foreign investors cause a significant internationalization of the market.

–          By the middle of 2018 the yields will continue to sink to approx. 3.25% in the Top 7 markets because of the increasingly competitive position, premium markups for trophy buildings and portfolios will become the norm.

No question: the socio-economic signs for 2018 could not be better, the quantifiable risks are included in this: no significant interest rate increase is currently expected, but instead an increasingly competitive market, at which the quality of the properties is slightly declining.

Remember: he who demands or pays the highest value, doesn’t always act rationally.