German investment volumes set to hit €30b: Savills

Total turnover in the German commercial real estate market could reach €30 bn in 2013, outstripping the 2012 volume of around €25.3 bn, according to adviser Savills.

The forecast rise is based on expectations that transaction volumes will be high in the second half of the year due to a number of active major deals as well as an anticipated increase in activity in Berlin. A further rise in the real estate transfer tax is set to take effect in the German capital in 2014.

Around €12.5 bn was invested in German real estate in the first half of 2013, marking a 36% year-on-year rise and representing the strongest half year since H1 2008, when a volume of €12.9 bn was recorded.

‘Germany’s exceptional economic position is increasingly reflected in the local investment market and real estate as an asset class is becoming increasingly attractive the longer the interest rates remain low,’ commented Marcus Lemli, head of Savills Germany and head of European investment.

Savills notes that there is ongoing demand from risk-averse investors who are looking to buy assets that retain their value in economically challenging times. Insurance firms, pension funds and superannuation schemes, which accounted for direct real estate investments of €1 bn in the first half, illustrate this trend.

Savills data reveals that private investors and listed property companies each accounted for €1.3 bn of investment in the first half. Developers were by far the most active party on the sell-side, divesting property worth over €2.3 bn, three times the total of the first six months of 2012.

Demand for core and core-plus assets still exceeds available supply according to the firm, causing yields to drop slightly in H1 2013.

Prime yields for both office and retail buildings in the top six German markets of Berlin, Frankfurt, Düsseldorf, Hamburg, Munich and Cologne have dropped by ten basis points on average, to 4.7% and 4.2% respectively.

Yields for secondary CBD offices have likewise declined slightly to 5.5% on average, whereas yields for higher risk properties have remained unchanged.