German investors shift focus to domestic market: CBRE

Commercial real estate investors from Germany remain significant players in the European property market, but are increasingly focusing on their home market, according to the latest data from CB Richard Ellis (CBRE).

Germans were the second largest players in the European property investment market in the first half of 2011, accounting for 16% of total real estate investment activity in Europe. However, German investors have become far more focussed on the strong economic fundamentals and resulting opportunities in their home country, rather than cross-border markets.

Many investors consider Germany's property investment market as stable and prosperous and are therefore increasingly targeting this market. Nine of the 10 largest deals by German property investors took place in Germany in H1 2011, composed primarily of office and retail deals.

Mirroring investors' preferences for prime German assets, the maximum loan size in Germany doubled to EUR 200 mln in a single quarter, with competition between lenders to finance prime transactions in this core market allowing Germany to defy the trend of tightening lending conditions that has been spreading across Europe.

In particular, German open-ended funds reduced cross-border acquisition activity, buying just EUR 647 mln worth of real estate in H1 2011, compared with EUR 1.25 bn in H1 2010. These funds have been much more active in their home market in 2011, while at the same time being substantial net sellers in the UK, Belgium, and Sweden.

The significant fall in German activity in Europe coincides with an increase in the level of trading by investors from the US. Investors from the US alone accounted for 22% of all cross-border investment in Europe in H1 2011, (H1 2010: 16%). While equities continue to come under pressure, commercial real estate remains an attractive asset class for US investors within a well-diversified, multi-asset institutional portfolio.