The boom continues – record prices reflect favourable conditions
- Commercial property changed hands for almost €12.2bn in the first quarter of 2018, a decrease of 5% compared with the corresponding period last year (Graph 1). This transaction volume is in line with the quarterly average over the last five years, which also underlines the longevity of the current boom.
- The conditions for investors are almost perfect. The population and the economy are growing and, consequently, demand for space and rents are rising in many sectors. However, such a near-perfect environment also entails record lows in initial yields. Prime office yields across the top seven cities remained at 3% (Graph 12). The yields also reflect rental growth prospects, which could allow longterm investors to achieve attractive returns on their invested capital going forward.
- Despite the high pressure to invest, the majority of investors remain highly risk-averse. Accordingly, the top seven cities accounted for almost 49% of the overall transaction volume (Table 1) and almost 90% of investment in the office sector. Investors are evidently placing great importance on the liquidity of these markets.
- Even if the simmering trade dispute between the USA and China poses a risk to the exportoriented German economy, there is currently greater evidence to suggest that the boom in the commercial property market will continue. The overall investment volume for the year is expected to reach as much as €55bn.