Germany’s accelerating rate of economic growth – tipped to double in the near term – could lead to a sharp tightening in supply in the office market, according to Tristan Capital Partners.
The investment manager forecasts that emerging strong pent-up demand will squeeze real estate supply, particularly for offices, over the next year and near future. Tristan also said reinvigorated consumer demand bodes well for retail property values.
Ralf Nöcker, managing director of Tristan’s German Properties Performance Partners fund (G3P) said: “The last few months have seen a remarkable increase in leasing activity, not just in the prime retail and office locations of bigger cities, but also in smaller markets all across the country.”
German GDP expanded three times faster than the euro-zone average last year, strongly boosting consumer sentiment and underpinning retail sales. However, Tristan said this has not yet translated into higher office take-up volumes, reflecting the “normal lag between firms becoming more confident in the outlook and executing strategic real estate decisions”.
It added: “Pent-up demand for office space is building, and once positive business sentiment has reached a critical level, could be released. With vacancy rates at multi-year lows, supply-shortages are probable in the next year or two.”
The increase in German leasing activity has not been confined to prime locations in major cities; secondary markets that were, until recently, seen as peripheral and less attractive have also been picking up speed, Tristan added.