Demand for German commercial property is expected to stay high in 2017, following one of its best years on record.
2016 saw investment in Germany commercial real estate total €52.7 billion, down 9 per cent year-on-year and the third highest year by volume on record.
For the first time in the current investment cycle, German investors contributed a negative net investment volume of €4.3bn, according to Savills’ latest research. 62 per cent of 2016’s transaction volume was attributable to German vendors, the highest proportion in the current cycle, i.e. since 2009.
Nonetheless, with foreign investment booming in Germany in the last year, demand is forecast to remind high during 2017. This is partly due to the low interest rate environment, which makes real estate attractive to investors, but also due to Germany’s ongoing status as a safe haven. The only headwind facing the market is a supply shortage, which may saw transaction volumes this year suffer a “moderate decline”.
Hotel demand drives investment in Germany commercial property
19th October 2016
Demand for hotel and industrial property is driving investment in Germany’s commercial real estate market.
Transactions in the first three quarters of 2016 fell 18 per cent in the first three quarters of 2016 compared to the same period of 2015, with investment volume declining to €32.5bn. Nontheless, the figure marks the second highest result since 2007.
The largest decrease occurred in the office and retail sectors, which declined 15 per cent and 46 per cent respectively. However, hotels saw investment levels soar 47 per cent, while logistics and industrial property also saw levels surge 17 per cent. Savills also highlights rising interest in nursing homes.
Berlin remains a particularly sought-after hotspot for both domestic and international investors. Appetite is fuelled by the healthy situation for owners in the lettings markets, with high occupier demand low supply set to push up rents.
“From an investor’s perspective, however, Berlin is not only perceived as the most dynamic market in Germany, the capital’s diversified sector mix also makes it a safe haven for investment,” notes Savills. “This combination is manifesting itself in further yield compression, which is also increasingly evident in up-coming B-locations such as Charlottenburg.”
However, the low supply is also holding back investment volumes, with transactions falling year-on-year in Berlin.
However, with a substantial deal pipeline, we expect a strong final quarter.
The same is true of the wider country, with Savills forecasting transaction volume to fall short of last year’s total.
“We expect a volume of up to €50bn for the year in its entirety,” says the firm’s report.
“In view of the sustained extremely low interest rates and favourable economic conditions, the above average level of capital seeking investment opportunities in the German real estate market is likely to persist.”
German boom drives European retail investment to record high
16th March 2016
Investment in European retail property reached record levels in 2015.
Investment levels climbed 4.6 per cent year-on-year in Q4 of 2015, according to CBRE, taking the total annual investment to €69 billion, up 31 per cent on 2014.
Foreign investment accounted for 48 per cent of investment, substantially higher than previous years. Indeed, in the last quarter of the year, half of all retail investment came from cross border transactions; €8.8 billion was invested, up from 42 per cent in Q3 2015.
The rise in cross border investment has been driven by integrated intra-regional acquisitions. In 2013 and 2014, intra-regional investment accounted for around one-fifth of all retail investment. In 2015, the levels moved up to 29 per cent of the total transacted.
The UK remains the largest retail CRE investment market in Europe, with investment voluems up 6 per cent in 2015 to reach €19.9 billion. The German market grew more than any other in 2015, though, with investment up €7 billion to reach €16.2 billion (76 per cent). Germany’s boom was driven by growth in the shopping centre and high street retail sectors.
Norway also enjoyed “exceptional” investment growth, notes CBRE, from €655 million in 2014 to €4.8 billion in 2015. The country overtook France to become the third largest market in Europe. It is worth noting that the CEE region experienced its highest level of investment since the previous peak in 2007, and at €5.1 billion was double that of 2014 figures – predominantly driven by Poland and the Czech Republic.
When looking outside of Europe, in the second half of the year, US buyers were by far the largest source of capital, accounting for 72 per cent of all cross-regional retail investment.
Chinese buyers were the second largest non-European sources of capital in H2 2015. Non-European buyers seem to be looking at locations outside of core cities, the top destinations for cross-regional investment in the last six months of the year were nationwide portfolios and secondary cities.
“In 2016, we expect to continue seeing high levels of investment coming from on the continent,” comments John Welham, Head of European Retail Investment at CBRE.
German retail property enjoys “exceptional” boom
15th February 2016
Germany’s retail property market is booming, as agents witness “exceptional” demand from investors.
Berlin has become a hub for foreign investors in residential real estate, thanks to strong returns and a growing population, but the country’s commercial market has been just as active. According to Savills, €19.4bn was invested in German retail property in 2015, more than double the volume achieved in the previous year.
High-street properties were particularly sought-after with a total volume of more than €7bn invested, with large shops and department stores accounting for the biggest deals. Transaction volumes multiplied more than five times year-on-year.
Foreign investors dominate the market, accounting for 61 per cent of sales volume. Transactions were divided equally between individual deals and portfolios, notes Savills, with the three largest transactions of the year the acquisition of the Kaufhof portfolio by a joint venture between HBC and Simon Property Group, the acquisition of Corio by Klépierre and the purchase of a portfolio of high-street properties by Deka.
“Initial yields hardened significantly last year, most notably on retail parks. The prime yield in this segment hardened by 50 basis points during 2015 to 5.1 per cent,” comments Savills. “Since demand continues to exceed supply and will do so for the foreseeable future, yield compression is expected to persist across all segments. “However, since this is likely to be less pronounced in 2016 compared with last year, rental growth potential will become more important.”Google+