The Real Deal New York

With Brexit on the horizon, Frankfurt’s office market breaks records

Large commercial deals pushed 2018 transaction volume to €10.4B
January 12, 2019 01:00PM

(Credit: iStock)

Ever since the Brexit referendum, Germany’s financial capital has been positioning itself to receive an influx of London bankers. With just months to go until the split is official, those ambitions have pushed Frankfurt’s commercial real estate market to record heights.

Frankfurt-based state-owned bank Helaba predicts that as many as 25 banks, including Goldman Sachs, Citi, JPMorgan and Barclays, will move operations and staff from London to Frankfurt, reported the Financial Times. In the long term, the number of staff employed by foreign banks is predicted to grow from 2,000 to as much as 8,000.

According to data from BNP Paribas Real Estate, Frankfurt saw a total of €10.4 billion in commercial real estate transactions last year, an all-time high and a 36 percent increase from 2017.

Major deals by professional investors drove much of this growth, with several large office towers changing hands. Two-thirds of the deals involved transactions of at least €100 million. At the same time, however, rising real estate prices have put downward pressure on returns. The average yield for office space in Frankfurt fell below 3 percent for the first time ever in the last quarter of 2018.

The United Kingdom’s exit from the European Union is scheduled for March 29. [FT] — Kevin Sun