Germany continues to draw strong international interest

Interest in German commercial real estate remains high among both German and international investors with retail property a top favourite, according to a report from Colliers International.

'Total transaction volume up to the end of the third quarter came to just under EUR 16.8 bn, more than 27% above the previous year’s result,' said Andreas Trumpp, head of Research at Colliers International in Germany. 'The quarterly results have been very balanced thus far, fluctuating between EUR 5.4 bn and 5.7 bn,' he added.

Prime yields for first-class office properties are holding steady when compared with the previous quarter, with the exception of Stuttgart, where a decline of 20 base points was noted, from 5.40% to 5.20%. Munich (4.50%) and Hamburg (4.70%) are the most expensive locations, followed by Berlin (5.00%), Frankfurt (5.20%), and Düsseldorf (5.25%).

About 31% of the transaction volume registered between January and September (EUR 5.2 bn) came from portfolio sales. International investors invested some EUR 6.6 bn in Germany during this period, making them responsible for about 40% of the investment volume. About EUR 7 bn, or about 42% of the transaction volume, was registered in the country’s six top locations: Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart.

Retail property continued to attract strong interest in the third quarter, accounting for EUR 7.9 bn, or nearly 47% of total transaction volume. Demand for office properties increased slightly in the third quarter, but still trailed at some distance in second place, accounting for approximately 28% of transaction volume (just under EUR 4.8 bn).

The sale of the Deutsche Post real estate portfolio, which Dundee International REIT purchased in the third quarter from a Lone Star fund for over EUR 700 mln, pushed the investment total for mixed-use properties to about EUR1.5 bn, or almost 9% of the overall transaction volume. At the same time, this portfolio sale is among the biggest deals of this year. The year’s top 10 transactions also include the sale of an 80% share in the Skyline Plaza shopping centre project, in Frankfurt, by CA Immo Deutschland and ECE to Allianz Real Estate. The volume of the overall project has been assessed at EUR 360 mln.

Open-ended and special real estate funds accounted for some 19%, or nearly EUR 3.3 bn, of the transaction volume by the end of the third quarter. 'At the same time, investors with riskier investment strategies were also very active on the investment market, spending a total of about EUR2.9 bn on purchases,' Trumpp pointed out. Project developers and closed-ended real estate funds follow, with approximately EUR 2.1 bn invested by each group. The sale of the Deutsche Post real estate portfolio to Dundee International REIT ensured that REITs accounted for an above-average share of over 7% of transaction volume.

Based on a significant number of larger transactions currently reaching the final stages of negotiations, Colliers assume full-year transaction volume will reach the upper end of the forecast made at the start of the year, of EUR 20 to 22 bn.