Aberdeen Asset Management is looking to raise €1.5bn for a German residential and retail property fund.
It said its German Urbanisation Property fund would invest in residential projects and mixed-use developments with retail elements.
It cited the potentially higher yields than investing solely in residential, with the German government supporting mixed-use developments.
An initial €150m has been raised for the fund from pension funds, insurance companies and other institutional clients.
Fabian Klingler, head of direct property, said low construction activity relative to population growth had created a demand/supply imbalance, particularly in German metropolitan areas.
Aberdeen said high-quality German residential property currently offered an average gross yield of 4.5% – a more stable, albeit lower, income stream compared with office and industrial assets.
It said mixed-use investments could provide higher overall returns than residential on its own, without adding a significant amount of risk.
The residential element offers low vacancy rates and low tenant turnover, while the retail part holds the attraction of long-term leases, it said.
Aberdeen estimates a typical gross yield of 4.5% for newly built residential property, while a typical yield for convenience retail stores serving the local neighbourhood is around 6%.
Combining the two, it said, could provide a 5% gross yield for a mixed-use asset.
Practicality, it added, is also an attribute of such investments, with institutional investors likely to find a single supermarket “too small to bother with”, after considering the time required to invest in and manage an asset.
