Germany loses its lustre as safe haven

While Germany is still widely perceived as the safe haven in Continental Europe, there are signs that it is losing its shine. The prospect of low growth in Europe is deterring international investors, noted Thilo Wagner, head of property investment at Henderson Global Investors' German office.

Speaking at PropertyEU's Outlook 2013 Investment Briefing held at the Opernturm tower in the Frankfurt office of law firm Ashurst last week, Wagner said his firm was engaged in raising equity for two funds in Germany for local retail warehouses and logistics. 'The appetite to allocate money to Europe from US and Asian investors is quite low and we have seen a slowdown in the last few months. I don't expect the market to do anything different next year.'

European investors will be key in the next 12 months, he added. 'Unless there's a price shift and opportunistic investors come in.'

Annette Kröger, head of acquisitions at German insurance giant Allianz, maintained that Germany remains attractive compared to other countries. 'Economic growth is slow but stable. And because there has been so little development activity, there is limited supply.' But it is not plain sailing, she acknowledged: 'Tenants are taking more time to make a decision.'

In Germany, Allianz remains strongly focussed on core locations in the big seven cities. The run on retail has pushed shopping mall yields down to record levels and this trend will continue, Kröger said, alongside more redevelopment activity. ‘But I think we’ll also see a stronger move to secondary locations.’

The liquidation of some German open-ended funds will provide some product, but the question is whether these properties are core assets and whether price expectations are realistic.

At the same time, it is also questionable whether the huge gap between core and secondary assets - which in some cases can be as much as 400 basis points - is justified, Henderson's Wagner noted. Nevertheless, Allianz will remain focused on prime locations for offices, Kröger said. 'We're more flexible on the retail side in regions with good purchasing power, but we’re not a buyer of secondary property in general. In Poland, we would only buy prime offices in Warsaw CBD and Mokotow. We would also go for the best locations in the Nordics, like Stockholm and Helsinki.'

Kröger acknowledged that Poland was starting to lose its lustre due to fears that its relatively high economic growth will not be sustainable in the coming years. ‘But retail markets are still quite attractive,’ she maintained. 'Occupancy rates are high and in some locations there are waiting lists for tenants. In Poland we will continue to look for dominant shopping centres in larger regional cities with economic strength and growth opportunities.'

The full story appears in the December issue of PropertyEU. Click on the link below to subscribe