EUR 22b GOEF sell-off risks flooding some European submarkets: IVG

The sell-off of EUR 22 bn of real estate assets by German open-ended funds (GOEFS) in liquidation could pose problems for sub-segments of the market, particularly in Germany and France, Germany's largest listed real estate company IVG has warned.

In all, 11 GOEFs have finally suspended the redemption of their investors' units due to liquidity problems. As a result, they now are legally forced to sell off fund properties. As the funds are wound up, commercial properties with a value of around EUR 25.5 bn will arrive back on the market by April 2017 at the latest, including properties with a volume of roughly EUR 22 bn in Europe alone.

IVG noted that at first glance the figure for Europe does not seem excessively high compared to the investment volume on Europe's commercial property investment market of EUR 108 bn on average over the last four years.

But an analysis of the portfolio allocation of the funds affected to countries and sectors paints a more worrying picture: 80% of the European fund portfolios are concentrated on the office sector, which in the last four years accounted for only 44% of commercial property investments in Europe on average. In addition, almost half of the office properties held by funds in Europe to be liquidated - measured in terms of market value - are located in the two major investment countries of Germany and France.

IVG has concluded therefore that the liquidation of various GOEFS , while not a fundamental problem for the European real estate market as a whole, will clearly pose a problem for certain sub-segments.

Thomas Beyerle, head of research at IVG, said the research examines what will happen on the respective local, regional and national markets if the companies are legally obliged to monetise their assets.

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