GERMANY - Investors should invest in German retail for the long term, but exercise regional caution in a market characterised for strong demand and limited supply, according to fund manager Cordea Savills.
In an optimistic assessment of its long-term prospects, research and strategy director Andrew Allen has described German retail as "100 local markets".
Allen cited "massive differences" between regions, notably between the old East and West Germany.
"Local dynamics are huge. Wide differences between demographics and economic prospects - at town and state level - are affecting the demand side. On the supply side, you have modern shopping centres in new Länder [states]. In other words, you have modernity and supply in places with the worst prospects. "I'm not particularly surprised that there are differences - but the scale of them is surprising," he said.
Yet Allen dismissed the idea that long-term forecasts could yield shorter-term clues about likely consumer spending trends, arguing investors should not be swayed significantly by short-term indices.
"We're not making a point about the short-term. There's a long-term strategic change in the German market, and it should be on investors' radar," he said.
"There are plenty of fundamental reasons why consumers are willing to spend and investors shouldn't be setting too much store by short-term indices. Short-term changes are interesting - but they're not the story."
IPD figures published last week identified Germany, along with the UK, as Europe's worst-returning property market.
Meanwhile, RBS senior economic adviser Robbie Denoon claimed, in a macro analysis last week, German exports remained exposed to slower global growth, and consumers "may continue to save rather than spend".
He concluded: "German economic growth will slow this year but remain above trend…the outlook is good, aber nicht wunderbar."