Investment in German commercial real estate in Q1 2022 reached €18.2 bn, exceeding the 5-year average by over 50%, according to new research from Colliers.
The Q1 volumes doubled the previous year’s weak transaction volume for the same period, while beating 2020’s impressive all-time record of €17.6 bn.
Matthias Leube, CEO of Colliers, commented: 'We expected an above-average start to the year in light of the impressive end-of-year rally in 2021, the ongoing recovery from the pandemic on the leasing markets and the prospect of an accelerated economic upturn in 2022.
'However, Germany’s leading economic research institutes agree that recent events related to the war in Ukraine will put a dent in economic growth. GDP forecasts have been revised downward from 3%-4% to 2%-3% for 2022.
'Increased construction costs, as well as limited availability of construction materials and contractors, will continue to impact property developments and forward transactions.
'Rising interest rates are also starting to weigh on investors. The rapid increase in inflation, however, is making investment in commercial real estate more attractive.'
Christian Kadel, head of capital markets at Colliers, added: 'We expect investors to continue to behave as they did during the pandemic as uncertainty on the market remains high.
'Investors are increasingly acquiring or investing in companies holding large property portfolios instead of directly purchasing real estate.
'They are doing this to get their foot in the door in the highly competitive most resilient sectors and locations in Germany. Although this trend was mostly limited to the residential segment in the previous year, the focus shifted to commercial real estate portfolios in Q1 2022.'
Office, logistics and food-anchored retail
Demand once again centred around core office assets and office properties with strong upside potential. Overall, office assets accounted for around 51% of total transaction volume in Q1 2022.
Several portfolio deals in the mid-9-figure range contributed to the 21% market share claimed by industrial and logistics assets, putting them in second place.
Retail assets fell short of the results generated by the industrial and logistics segment by a long shot. Despite the ongoing strong market activity, the food-anchored retail warehouse segment fell back to third place with a market share of just 13%.
Foreign investor activity picks up
'Thanks to large-scale transactions and Germany’s reputation as a safe haven, foreign investor interest picked up significantly after slow activity in the previous year,' said Kadel.
The overall market share generated by foreign investors came to 48% of total transaction volume in Q1 2022, with investors from Canada claiming first place (25%), followed by the US (6%) and South Korea (4%).
Leube added: 'Although year-end results for 2022 are difficult to forecast at this stage, we expect to see a result in line with 2021 of around €60 bn.
'This is thanks to lively market activity, even during two years of pandemic-related challenges, and the combination of the importance of real estate as an inflation-proof investment.'
