Appetite for German resi set to continue in 2013

German residential will remain the flavour of the year in 2013, according to Marcus Cieleback, head of research at Patrizia Immobilien.

Speaking at the Outlook 2013 Investment Briefing held at the Opernturm tower in the Frankfurt office of law firm Ashurst recently, Cieleback said that there are still some pockets where value can be extracted. However, he warned investors to be more creative in terms of asset management as this is not a typical buy and hold proposition.

Other European markets like Denmark are also looking increasingly attractive, he said. Despite being management intensive, residential offers a stable cashflow, he pointed out, citing 4.5-5% yields in Copenhagen. As repricing takes further hold in the Dutch market, opportunities will also emerge there in the next 12 months, he predicted.

While there is interest in the UK market, supply is scarce, he argued. Investors brave enough to venture into Dublin - like US-based Kennedy Wilson - can achieve a yield of 6% in the city centre, Cieleback pointed out. 'If you believe in the euro, Ireland is a very good story and there is still some upside for rental growth.'

Investors would also do well to group a select number of satellite segments around the traditional core sectors of London and Paris offices and German retail, he advised. 'We have picked logistics; this asset class is not yet institutionalized in Germany to the extent that other sectors are. In the UK, about 35% of logistics assets are in the hands of institutional investors compared to about 10% in Germany. This is an interesting gap where we can step in.'

The retail warehouse sector also offers potential, he argued, despite lower covenant strength and shorter lease lengths than for shopping centres. 'Lease lengths are typically only five years and LTV financing is not as high as for retail properties, but this segment offers interesting IRRs.'

The full story appears in the December issue of PropertyEU. Click on the link below to subscribe