The German retail property investment market showed 'significant upward movement' in the third quarter after a 'moderate' level of trading in the first six months of 2016, due to the lack of available product, according to BNP Paribas Real Estate.
The investment volume of the first nine months came to €8.5 bn, the broker said in an update. This result is 39% down on the all-time record set last year, which can't be used as a benchmark as about a quarter of that volume came from two major transactions, said Piotr Bienkowski, CEO of BNP Paribas Real Estate Germany.
The big 2015 deals were acquisition of German assets by French REIT Klepierre as part of its takeover of Dutch peer Corio and the acquisition of the Kaufhof department store properties by a joint venture of Hudson Bay Company and Simon Property Group.
'The fact remains that the overall result for the first nine months of 2016 is the fourth best-ever recorded,' Bienkowski added. Germany saw its second-best year ever over the period in terms of single-asset transactions, which at €6.24 bn was 2% higher than the previous year.
The German market has fallen so far this year in terms of portfolio transactions. The portfolio volume of €2.3 bn for the first nine months is 70% down on last year. The Big-Six markets (Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne and Munich) have in recent years benefitted disproportionally in portfolio transactions. This year portfolio volumes in these markets dropped to €2.4 bn.
Lower volumes do not point to lack of investor interest, BNP Paribas Real Estate said. In fact the weight of capital hanging over the German market has compressed retail property yields further. Yields in the Big-Six markets decreased on average by 22 basis points. Munich remains the most expensive market, with the prime yield unchanged at 3.25%, now closely followed by Berlin on 3.4%. Hamburg is in third place on 3.5%, with the remaining three cities at 3.%. But BNP Paribas Real Estate said that buyers are willing to pay even more for 'absolute premium premises' if the conditions are right.
Supermarkets were the most traded asset (45% of the market) due mainly to the lack of shopping centres on the market.
The largest transactions in Q3, according to PropertyEU Research, include Patrizia's acquisition in July of a 110,000 m2 portfolio with more than 10 retail properties across Germany for over €200 mln. Around the same time Corestate Capital purchased 31 high-street retail properties in 30 German mid-sized cities for €115 mln.
