Compared to the same period of the previous year, the investment market for office real estate recorded a decline of 62 percent in the first quarter of 2021. A current analysis by the global real estate service provider CBRE gets to the bottom of this development.
Strong quarters in 2020 distort the overall picture
CBRE published the results of the analysis in a press release. Accordingly, the office property investment market posted a total transaction volume of 3.2 billion euros in the first quarter of 2021. That means a decrease of 62 percent compared to the same period of the previous year. For the real estate service provider, this is mainly due to the tight supply situation on the market and the very strong end-of-year quarter of 2020, “in which a particularly large number of deals were concluded that did not benefit the market in the first quarter,” says Fabian Klein, Head of Investment at CBRE in Germany, announced in the press release.
In addition, the first quarter of 2020 was the strongest starting quarter on the German office investment market, which, according to CBRE, also explains the strong percentage decline. Fabian Klein describes investor demand as “unbroken”, especially for high-quality core properties. “Since the middle of the first quarter, more products have come onto the market again, which will give the transaction activity a boost,” says Fabian Klein.
Investor demand is gathering in top locations
This strong demand from investors can therefore also be observed in the prime yields for office properties, which on average fell across the top 7 locations by five basis points from 2.89 to 2.84 percent compared to the same period of the previous year. 71 percent of the transaction volume was attributable to the top locations, which include Berlin, Hamburg, Frankfurt, Munich, Düsseldorf and Stuttgart, among others. According to the CBRE, interest from international actors is particularly high here. “Internationally operating investors continue to ask the German investment centers unabated”, as Dr. Jan Linsen, Head of Research at CBRE in Germany, explains. Nevertheless, the share of investments by international investors in the German office investment market fell by 16.5 percent in the first quarter of 2021 compared to the same period of the previous year.
Outlook points to recovery
According to Fabian Klein, there are already “clear signs of a noticeably increasing dynamic” on the German office investment market. For the year as a whole, CBRE expects an investment volume of up to 25 billion euros. Fabian Klein assumes that office properties will continue to be the most important asset class. After all, according to the Head of Investment CBREs, the prospects suggest that more people will return to their traditional workplaces in the office in the near future.
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