A surge in foreign investment propelled Germany’s commercial property market to its third-strongest year on record in 2014.

A surge in foreign investment propelled Germany’s commercial property market to its third-strongest year on record in 2014.

The 12-month sales total of €40.15 bn was boosted by a strong last quarter in which assets worth €14.7 bn changed hands, according to a report by BNP Paribas Real Estate.

Hotels and logistics were the fastest growing sectors, accounting for 7.6% and 10.5% of all transactions respectively, but the market continued to be dominated by office sales, which made up 42.2% of the total, followed by retail (23.2%).

The arrival of investors from Asia and the Middle East boosted the proportion of foreign buyers from 33% to 48% by the end of the year. Historically low interest rates and the recovery in the German economy also had a galvanising effect on the market.

More than half of the total volume of transactions (55%) took place in the ‘big six’ German cities – Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne and Munich. But their individual fortunes diverged widely, with Frankfurt growing by 43% compared to just 4% for Düsseldorf.

Single-asset deals reached a new record level in 2014, making up 69% of the total figure. Portfolio sales grew by 57% and were more attractive to foreign buyers, who accounted for for 68% of such transactions.

Piotr Bienkowski, chairman of the management board at BNP Paribas Real Estate Germany, said demand would continue to be high in 2015.

‘The historically favourable interest environment, clearly better financial conditions and a generally stable German economic picture represent an extremely attractive environment for investors. It is hardly surprising that they are prepared to invest more of their own capital than in the years before the financial crisis.’

For more on the prospects for the German market, see the article and video presentation from the Outlook 2015: Europe & Germany investment briefing.