BRIEFING: Scarce assets squeeze German yields

Lack of product is squeezing yields in all German property sectors, PropertyEU's latest investment briefing on Germany has heard.

‘Pricing and product is probably the challenge that we face most,’ said Philip La Pierre, head of European investment management for Union Investment in Germany, which spent around €1.3 bn in the country last year. ‘We see it as a challenge on the product side in the years coming’.

Marcus Cieleback, head of research at Patrizia Germany, said: ‘Investors need to move up the risk curve, because core product is scarcely available and there is a lot of money targeting Germany.’

This may bring credit issues, he noted, as ‘I don’t think banks are moving up the risk curve as much as the investors'.

Yet even in secondary cities, yields are relatively tight, according to Cieleback. ‘In these smaller cities, you’re competing with a different breed of investors. You have a lot of family offices and high net worth individuals in these cities and they still think 5.25% is an attractive return compared to what they get in the bank.’