GERMANY - The German commercial real estate market has seen in influx of international investors in 2010, accounting for 40% of all transactions in the first half of the year, according to Savills.

The property agency said total transaction levels during the first half had increased by 148% compared with the same period last year, as buyers from the UK, Netherlands and France in particular targeted German real estate.

Savills predicted commercial real estate investment in Germany would total €16bn by the end of the year, compared with €11.2bn in 2009, largely driven by foreign investment.

However, domestic investors, including open-ended funds, closed-end funds and listed property companies, still predominate.

Savills suggested cross-border investors were motivated by rental growth forecasts, as well as falling unemployment levels (7.6% in August 10 compared with 8% in September 2009).

In addition, Germany has seen five consecutive quarters of GDP growth, with an all-time high since reunification of 2.2% in the second quarter.

Giles Wilcox, head of European cross-border investment at Savills, said: "Investors have been cautious to date and in the main focused on London and Paris, but as the economy recovers, the top five cities in Germany are becoming a prime target alongside these locations.

"The occupational market has remained relatively steady compared with the volatility that has provided opportunities in London and Paris, but rising rental growth forecasts in

Germany, as well as a strengthening economy, have given international investors motivation to focus on the returns to be made in this market."

Retail has been the most popular sector in Germany, accounting for more than €4.3bn of transactions in the first half, while offices ranked second at more than €2.9bn.

Savills said the consumer climate had improved in recent months, with declining unemployment figures supporting the high levels of demand for shopping centre and retail warehouse stock.

Munich and Berlin have seen significant office deals, including the acquisition of Sony Center for €572m and a Munich commercial park accommodating Siemens for more than €360m.

Lars-Oliver Breuer, head of investment at Savills Germany, said: "Foreign investors have returned to Germany, investing almost €4bn in the first half of the year.

"As well as portfolio deals, interest in larger property volumes has risen, with 15 transactions above the €100m registered in the first half the year - we have seen some interest from Asian parties for deals of this scale."