The UK's loss is Germany's gain, as international investors worried about the implications of a Brexit scenario look beyond the Channel to mainland Europe. The uncertainties surrounding the EU referendum in June are leading to a certain stagnation in the UK market, as investors delay decisions until after the results have been announced.
Germany, with its unquestioned stability and safe haven status, is a striking contrast and the obvious alternative to the UK, experts agreed at PropertyEU's Germany Investment Briefing, which was held in London this week at the City offices of TH Real Estate.
'There is definitely more investor interest in the market as sentiment has switched away from the UK to Germany,' said Karsten Kohlmann, managing partner of Waterway Investments, a transaction advisor in commercial real estate. As revealed by the surprise findings of a recent CBRE global survey, Germany has just overtaken the UK as the European destination of choice for international property investors.
A chronic lack of core product, along with investors’ increasing willingness to move up the risk curve, are making non-core and niche markets more attractive. 'You can always find investors willing to buy, even in secondary cities and even if the building quality or the location are not perfect,' said Kohlmann.
'In the traditional A cities there is no core product available, so investors are turning to B locations in A cities or to A locations in B cities,' said Georg Orlich, director of Corpus Sireo Asset Management. ‘The latest figures show a continued strong demand for retail, with over 60% of investors thinking it is preferable to offices or residential, because in the context of a strong economy it is seen as less dependent on passing trends.'
Out of town retail parks, in particular, are regarded as being in a strong position in the competition with online trading, Orlich said: 'Footfall in retail parks has increased, while it has decreased in high street shops and shopping centres, and the sector is still producing interesting yields compared to other markets.'
The best option is buying and refurbishing existing assets, as large-scale developments are virtually impossible. Investors are extremely unlikely to obtain permits to build out of town, as the German government has a policy to strengthen city centres. Yet developments in the city centre are invariably opposed by a powerful alliance of local shops and local residents.
'Redeveloping and refurbishing retail parks and shopping centres becomes the obvious solution, and it gives the investor a chance to create something new within the frame of the existing, with no need for permits but just following existing guidelines,' said Orlich.
Another plus of investing in German retail is that the market has been less affected by the e-commerce revolution, especially compared to the UK, and this year a 5% sales growth is expected. 'All the big retailers have multi-channel strategies in place,' said Orlich, 'and while many small shops will close because no longer viable, the retail parks and shopping centres that have adapted to meet customers’ demand will continue to thrive.'
