Degi sees soft landing for German market in 2008

German property investment company Degi expects the real estate investment market in Germany to dip in 2008, ending the series of records witnessed since 2005. 'It won't be an abrupt decline, but a soft landing,' said Degi spokesman Marc Savani. He cited rising interest rates as one of the reasons for the anticipated fall in demand. 'A number of major players are reshuffling theilr portfolios as part of a strategic reallocation as the interest rate environment gets more difficult,' he said.

Commenting on the announcement last week that Goldman Sachs is selling EUR 3 bn worth of German office and department store assets, he said: 'Many foreign players based their investments on a series of assumptions, including interest rates. As these rise, they are looking to shift funds elsewhere.'

Nonetheless, Degi expects offices to remain in demand in the light of predicted rent increases. The German property market as a whole is on track for the third record year in a row, Degi said on Monday, with total transaction volume reaching an estimated EUR 60 bn. That represents a 38% increase on the record EUR 46 bn in transactions recorded for 2006. The first half of 2007 in particular was characterised by 'a high number of large portfolio transactions,' the company noted. Frankfurt was Germany's most active location, with a volume of EUR 3 bn.

Degi also said that many companies which are considering converting to a REIT are holding off the decision to assess the effects of corporate tax reforms which are set to come into force in January 2008.