Foreign capital pushes German investment to record

German commercial real estate investment rose in 2012 to the highest level in five years to €25 bn, UK-based adviser Savills reported.

This marks an 8.5% increase compared to an already strong 2011, largely reflecting rising levels of foreign investment. I

International buyers accounted for 46% of the total investment volume in Germany in 2012, up from 31% in 2011, while investors from continental Europe were by far the most active, investing approximately €5.7 bn. The most active nationalities were Austria (€1.3 bn), France (€1.3 bn), Netherlands (€0.6 bn) and Italy (€0.5 bn).

Investment volume was also boosted by the sale of a number of large packages in the final quarter of 2012, including TLG’s commercial portfolio and 17 Karstadt properties worth €1.1 bn each including KaDeWe in Berlin. In addition, the Kranzler Eck office scheme in Berlin and the Welle in Frankfurt changed hands in transactions amounting to approximately €784 mln in total.

In December alone, approximately €4.7 bn worth of real estate changed hands. This is almost as high as each of the first three quarters, according to Marcus Lemli, CEO of Savills Germany and head of European investment.

'More than ever Germany is seen as a safe haven by many foreign investors because it is one of the most stable European economies at the moment with above-average growth prospects in the medium term, high market liquidity and a moderate public debt ratio compared to most other Eurozone countries. Foreign buyers remain strongly committed to the market and are the main reason that the €25 bn mark was surpassed in 2012. These investors tend to focus on the major cities as they offer the necessary liquidity. We expect this international interest to continue to grow in 2013, particularly from sovereign wealth funds and public pension funds.'

Overall €12.9 bn was invested in the top six German markets of Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg and Munich according to Savills research, marking a 20% rise year-on-year (yoy). This increase is largely due to the rise in foreign investment with 52% (€6.7 bn) of the money invested in these markets in 2012 coming from abroad, compared with 35% (€3.7 bn) in 2011.

In terms of sectors specifics, all areas recorded a rise in activity in 2012 with the exception of retail. Savills research shows that €8 bn was invested in German office properties in 2012, marking a 9% increase yoy. Investment into logistics and industrial real estate increased by 51% to €1.66 bn, while €1.51 bn was invested in new developments sites (+47% yoy).

Overall the retail sector recorded €9 bn of investment transactions, representing a decrease of 17% yoy. The firm attributes this decline to a lack of product rather than falling demand, particularly in regards to shopping centres. The remaining investment went into the hotel sector (€1 bn) as well as mixed-use, social welfare and leisure properties.

The adviser is forecasting that transaction volumes in Germany will reach a similar level in 2013 to that achieved in the two preceding years.