German listed sector poised for consolidation, expert says

Germany's listed property sector is ripe for a round of consolidation, according to industry expert Rüdiger Mrotzek, board member at Hamborner REIT.

As demand for indirect real estate in Germany is expected to rise in 2014, the executive director is optimistic about the outlook of property stocks in 2014.

PropertyEU: Property stocks in general reported a modest recovery in 2013 after a couple of difficult years. What is the outlook for 2014?
Mrotzek: Indeed, we had a modest recovery at best for property stocks, while the overall market improved significantly. Consequently, property corporations, especially those with a discount on NAV, certainly have upside potential in 2014. As demand in the field of indirect property investments in Germany is also fairly likely to rise, we see good opportunities for property stocks in 2014.

PropertyEU: Do you expect to see a lot of activity in the listed property sector in Germany this year, particularly also with regard to G-REITs?
Mrotzek: Yes. There will be further consolidation of the sector in sub-segments, and we also expect additional market participants as a result of further IPOs in 2014. Overall, the market capitalisation of the listed property sector in Germany will continue to rise, making it more important, especially in comparison with the fund sector. In the medium term, the G-REIT is also sure to benefit from this, although we do not envisage any fundamental changes in the short term.

PropertyEU: What do you see as the main trends in the property sector going forward?
Mrotzek: One significant trend is the continued growth in demand for quality properties. With low supply, this is leading to rising prices combined with falling returns. In terms of asset classes, retail properties with long-term rental agreements are likely to grow in popularity. Sustainability is also an increasingly important factor, particularly for office properties.

PropertyEU: What are Hamborner's priorities for 2014?
Mrotzek: As in the past, increasing our Funds from Operations (FFO) per share is a priority. We have achieved this in the last few years through growth and efficiency improvements. Therefore, a priority for 2014 is to continue our successful business development with rising rental income, a low vacancy rate, falling operating costs and rising FFO. We aim to achieve these targets through active asset management, i.e. customer proximity, streamlined and efficient processes and selective sales of properties that are no longer consistent with our strategy.