Investment market
The fundamentally positive economic development over the last decade has resulted in sustained demand for real estate in all submarkets and has consolidated and expanded Hannover's position as the most important location after the seven major A cities in Germany. Hannover offers attractive investment opportunities and attracts national and international investors who want to invest in valuable locations.
Nevertheless, transaction activity is currently dominated by a nationwide slump in demand. Although the current investment volume is still characterized by weak demand, the previous year's result (€ 411 million) was slightly exceeded at € 413 million. At 48%, the focus was once again on the Industry and Production segment, which nevertheless accounted for 75% in 2023. The sales volume was dominated by several large transactions of over € 20 million
Market sentiment and trends
The long upswing on the German investment market has also brought falling yields and rising investment volumes to the Hannover Region since 2010. The investment market in Germany slumped significantly at the latest with the abrupt turnaround in interest rates at the beginning of 2022, while further crises and uncertainties in connection with the EU taxonomy are causing uncertainty.
In the Hannover Region, investment figures fell significantly at the start of the coronavirus pandemic in 2020 and initially stabilized at around € 500 million per year in 2021/2022.
Investment year 2024 again weak
Contrary to hopes, 2024 did not bring a turnaround on the investment market in Hannover. Although the result from 2023 was narrowly surpassed, the total investment volume of 413 million sqm (excluding off-market transactions) for commercial real estate in 2024 was still around €250 million lower than the average of the last five years. It should be added that the Hannover Region is thus in line with the national trend, where the hoped-for upturn in the investment market also failed to materialize in 2024.
Increasing demands for sustainability and energy efficiency
However, the investment pressure from many investors remains high. In the office and logistics submarkets, the prospects of rising rents for prime properties have recently improved further. Furthermore, none of the current projects can ignore the issue of sustainability and all of them are therefore a perfect fit for investment demand and the requirements of the companies using them.
Nevertheless, the discussions surrounding the amendment of the German Building Energy Act and the European Union's strict energy efficiency requirements for buildings are unsettling, especially for prospective buyers who want to invest in existing properties.
Yields rose only moderately in 2024
On a positive note, pricing in all asset classes appears to be almost complete. Although yields still rose over the year as a whole, a sideways movement in yields has been observed almost everywhere since around mid-2024. Office and hotel properties recorded the strongest growth in Hanover in 2024. Yields here rose by a total of 30 basis points compared to the previous year. The increase in retail and logistics properties was slightly lower at 20 basis points.
Number of transactions increased.
While two major deals alone were responsible for around 50% of the transaction volume in 2023, the volume in 2024 is again spread across a larger number of transactions. Nevertheless, > 60 % of the investment volume is accounted for by transactions in the EUR 50 to 100 million range. At around 49%, the logistics real estate market once again accounted for the highest share of the total volume, although the overall picture is much more heterogeneous than in the previous year, when logistics properties accounted for around three quarters of the investment volume.
Outlook: Cautious optimism is permitted
Developments at the end of 2024 and the start of 2025 give rise to cautious optimism for the investment market for commercial real estate in the Hannover Region. After a phase of market uncertainty, pricing now appears to have been completed across the board. Yields have stabilized, meaning that investors can once again rely on a solid foundation for valid decisions.
The now more stable market conditions are creating favorable entry opportunities for investors. It is noticeable that international investors are also increasingly taking advantage of opportunities to enter the market. This development could lead to a further revival of the market in the long term and further strengthen Hannover Region's attractiveness as an investment location.
The availability of liquidity remains a decisive factor. Investors who are less reliant on debt financing currently have particularly favorable opportunities to act opportunistically on the market. These market participants can react flexibly to attractive properties and secure competitive advantages.
Overall, the investment market for commercial real estate in Germany and also in the Hannover Region is currently somewhat firmer. However, the overall economic outlook continues to cloud the mood. New records are therefore not to be expected. Nevertheless, the signs are currently pointing to a slight recovery and give hope for a somewhat stronger investment year in 2025 compared to the two previous years.
Sustainability and energy efficiency determine the market
Market participants in Hanover expect opportunistic and value-add-oriented investors to become increasingly active in order to adapt outdated existing properties to current and future social, ecological and economic challenges through revitalization and realignment(manage to ESG).
The issues of sustainability and energy efficiency are becoming increasingly important in the commercial investment and project development market. In the office and logistics submarkets, there are still prospects of rent increases for top properties, although these are almost exclusively limited to new buildings in very good locations.
Rents for properties with quality or location deficits are coming under increasing pressure. At the same time, this is leading to a further spread in yield levels. The amendment to the German Building Energy Act and the ongoing discussions about the implementation of the EU taxonomy are contributing to uncertainty.