Prime office yields in Germany stable in Q2 - Savills

Prime yields for office buildings in CBD locations in Germany’s top five markets, Berlin, Düsseldorf, Frankfurt, Hamburg and Munich remained largely unchanged in Q2 compared to the first three months of the year, according to international property advisor Savills.

In Frankfurt the net initial yield moved out 20 basis points compared to Q1 and now stands at 5.5%. Berlin also recorded 5.5% yields, followed by 5.2% in Düsseldorf and 5.0% in Hamburg. With a net initial yield of 4.8% for prime properties, Munich currently shows the lowest yields.

Compared to Q2 of last year all markets recorded an outward movement in prime yields, but the extent varies in the individual markets. In Munich, for example, yields have risen by an average 10 basis points (bps) over the past 12 months, whereas Düsseldorf recorded an increase of some 20 bps and in Hamburg the rise was 30 bps. In Berlin average yields climbed by 40 bps. The highest rise was recorded in Frankfurt where net initial yields moved up by 60 bps compared to Q2 2008. The average yield rise for the five cities combined was 34 bps..

During the course of the past six months core investments were primarily purchased by German funds (such as Union Investment Real Estate, Commerz Real) as well as insurance companies (Generali Group). Smaller properties are increasingly attracting private investors with hardly any activity recorded on the foreign investors’ side.

Deal activity market is expected to rise in the second half of the year, and Savills predicts the transaction volume will exceed H1 09.