German retail rents and transaction prices continue to rise

German retail property group Hahn has reported that rental rates and purchase prices for retail properties in Germany will continue to rise. According to the Retail Real Estate Report 2007/2008 published by the company, foreign interest in German retail properties compares well with other European cities and demand is particularly high for inner city retail warehouse centres and shopping centres.

The findings are based on a survey of 30 retail companies and 30 real estate investors, including investment funds, private equity companies and real estate companies was carried out by the Hamburg-based institute of Dr. Lademann & Partner.

According to the survey, the price-to-rent ratios paid for individual large-scale retail properties is currently 14 to 16 times the annual net rent. About 33.3% of the polled real estate investors expect purchase prices to keep pushing upward, whereas 40% believe that prices will level out.

Real estate investors also expect demand for retail properties to remain high despite rising interest rates and the credit crisis. About 40% of the survey participants believe that transaction volumes will continue to increase during 2007/2008; while 50% expect the transaction volumes to remain as is. The planned investment volume reflects this assumption: 53.3% of the investors are planning to invest more in 2007 than they did in 2006; whereas 26.7% intend the stick to their current investment volume.

The survey also found that investors favour the southern states of Bavaria and Baden-Württemberg and they are increasingly attracted to Eastern European countries such as Poland (10%) and Russia (10%).