REAL ESTATE – The German real estate market is overregulated, the German Real Estate Forum in Frankfurt was told last week.

"We need to remove from Germany the need to regulate and overregulate," said Sam Zell, chairman of the board of directors at Chicago-based Equity International.

"Why should the definition of the open-ended fund be a regulator decision? It takes my breath away."

He also dampened expectations about the G-REIT, saying that "the law would be terrific for German real estate but with the country growing at 1% there will not be a real estate bonanza".

John Carrafiell, global co-head of real estate and managing director at Morgan Stanley in London stressed that the G-REIT is crucial for the German real estate market. He was upbeat about the opportunity presented by the German real estate market.

"Nowhere else in the world can you buy real estate at a 20-30% discount to replacement cost other than in Japan," he said. "Rent levels are at an all-time low and vacancy levels are at an all-time high – this is a very attractive scenario."

Carrafiell pointed out that Germany’s asset base is not always in professional hands. "It is often embedded in industrial companies where real estate management is not the core competence," he said. "It would be best to restructure by putting in place a professional strategy to refurbish and rework the asset.

"There is recovery in the German economy and we are buying vacancy. We recently bought a portfolio with 35% vacancy which we will be refurbishing and reworking."

Wolfhard Leichnitz, CEO at IVG and Bernd Knobloch, CEO and chairman of the board of Eurohypo, highlighted the enormous increase in German real estate from virtually nothing – two or three years ago – to considerable interest today.