GERMANY - A lack of core assets in the retail market has caused a significant drop in the number of deals in the first quarter, according to real estate company Patrizia.

Figures for the first quarter show a transaction volume of around €46bn, 64% less than in the same period last year.

Patrizia said the decline was not down to a lack of interest from investors but to a lack of core property assets.

It said: "Investors rather want to increase their real estate exposure than decrease it, but … too few core assets are available."

Longer term, Patrizia found that German property markets had been "mainly independent" from global market cycles.

It said the domestic market would therefore serve as a good "stabiliser" for global or European portfolios, as yields in those markets are set to fall.

In Germany, on the other hand, experts expect increasing rents and capital value.

In other news, there is not enough property in Germany to meet the high demand for modern living space, according to Bulwien Gesa's latest survey on project developments.

The property researcher noted that the local real estate industry had been "virtually untouched" by the economic conditions in the rest of Europe.

In total, the volume of project developments increased by 9.5% to €83.3bn compared with the previous year, with the growth being almost solely down to the residential sector.

The total area continued to decline in both the office and retail sectors, but considerably less so than last year.

Only the hotel sector continued to show considerable decline.

For the commercial sector, Bulwien Gesa said property developments were being realised speculatively again, but only in exceptional cases, and only when the project developer had a strong capital base.

"The lack of loan capital remains the highest factor of uncertainty for commercial real estate markets," it said.

It added that Hochtief and CA Immo remained the most active project developers.

For its sixth project development survey, Bulwien Gesa focused on the country's top cities - Berlin, Düsseldorf, Frankfurt/Main, Hamburg, Köln, München and Stuttgart.