Investment report Cologne – Third quarter of 2023 – The wait is over – "Mind the gap!" The first interested parties have already boarded the train and are sitting in the best seats facing forward – looking ahead so as not to miss anything and to see what lies ahead.
Another segment is still hesitant and prefers to wait for the next move. This is more or less how the situation on the investment market can be described at present. Investors who are on the investment express are playing it by ear, but they are moving forward and no longer waiting.
After a very weak first half of the year, transaction activity picked up slightly in the course of the year. Of course, the result is still at a low level compared to "before," but compared to the €65 million in the first half of 2023, the
Quarterly result of around €311 million is impressive, even compared to the top six locations. In the third quarter of 2023, around ten notable transactions were recorded in Cologne, meaning that the transaction volume exceeded its previous low. Compared with the first half of 2023, this represents an increase of 79%. The continued absence of large-volume deals and the restraint shown by institutional buyer groups contributed to this result. The deals recorded in the last nine months were predominantly in the office and logistics/light industrial property asset classes. Overall, there is increased demand for developable logistics/light industrial properties.
The largest transaction, worth around €65.00 million, is the KAP am Südkai in Cologne's Rheinauhafen. This is the southernmost office building in the Rheinauhafen, which PATRIZIA acquired from DWS Invest in Augsburg.
Another deal in recent weeks is the sale of a commercial building in Cologne's high street location at Schildergasse 52. The property was acquired by a family office from Germany for around €24 million. According to current research, we assume that the factor was just under 27 times the current annual net cold rent.
Another noteworthy transaction is the sale of a residential development project in Simons Veedel in Cologne-Merheim. BONAVA sold the project development with around 10,700 m² of living space to Bayer Pensionskasse for €54 million. What is remarkable is that this is a forward deal and the project has yet to be built. The two parties agreed on a purchase price factor of 24 times.
On the buyer side, once again, it is the equity-rich family offices and investment companies that are making the purchase entirely from their own capital. This is not surprising in the current market phase, as financiers are still very cautious or factor in correspondingly high risk premiums, meaning that most transactions can no longer be financed.
Purchase prices in all asset classes fell sharply in some cases in the third quarter. "Although we are not yet seeing widespread reductions in purchase prices, we are noticing that the market is picking up slightly again. A significant number of buyers are testing the waters again and want to take advantage of the new opportunities on the market," says Markus Larbig, managing partner of Larbig & Mortag Immobilien. The previous "wait and see" phase has thus been broken for the time being, and we are already looking ahead to 2024 with a little more confidence.
It is difficult to make an accurate statement about future prime yields. However, regardless of the asset class, the 5.00% mark is very likely to be exceeded.
The product range has continued to expand in recent months. In addition to numerous off-market offers, there are many properties on the market that are looking for buyers at short notice. We are currently seeing a few exclusive properties on the market again, which confirms the slight upturn in the investment market
Investment market. Even if the probability of deals being concluded is lower these days, it is still an indicator of renewed interest in acquiring new assets. We do not currently expect any further key interest rate hikes by the ECB. Even if the key interest rate remains at 4.50% for the time being, this brings some certainty to the market assessment.
"Larbig & Mortag and other market participants assume that the bottom of the price decline has already been reached for many properties and that some buyer groups are already looking specifically for suitable investments again. At the moment, family offices with strong equity capital are ahead of the game and are being welcomed by many sellers," says Larbig.
The total for 2023 is likely to remain below half a billion. Although this is one of the weakest results in the last 15 years, the revival in the third quarter of 2023 gives cause for cautious optimism.
