While the count of commercial property deals in Europe has dropped sharply due to the impact of the Covid-19 crisis, Germany is proving one of the most resilient territories for transactions, according to new research from Real Capital Analytics (RCA).
While RCA has recorded some 230 deals for April across the whole bloc, representing around one-third of the April 2019 figure, Germany's deal flow has been less impacted, with the country's transaction count down by just 24%.
Tom Leahy, RCA senior director, EMEA Analytics, said: 'In Germany, where the authorities seem to have managed the viral outbreak better than other large nations, the real estate market has held up better than anywhere else.'
Domestic players were behind a larger share of deals in Germany in April, though overseas investors still accounted for one-quarter of the transaction count. For instance, Swedish pension fund AP3 acquired an office property in Wiesbaden, close to Frankfurt, for €64 mln.
Among domestic players, Hahn Gruppe acquired the Eppendorf retail centre in Hamburg on behalf of an institutional investor for €103 mln, RCA notes. The same buyer also acquired two more grocery-anchored retail properties from Patrizia.
Leahy suggested that the effectiveness of Germany's medical response is likely be a factor, plus the fact that the country has also started to ease restrictions sooner than other large countries, with shops, bars and restaurants now open again, albeit subject to social distancing and other rules.
'Second, the country can afford the huge volume of public money that has been promised to try and keep Europe’s largest economy afloat,' Leahy added. 'Germany’s budget surplus has averaged 1.3% of GDP over the last five years and the fiscal support mechanisms put in place at the start of the crisis were the most generous in the world. Strong public finances may be an incentive for investors keep buying at a time when most governments are running up record deficits.'
In addition, Germany's domestic buyer base is seen as large, sophisticated and well capitalised. Said Leahy: 'Current travel restrictions clearly penalise cross-border investors and those with a local presence and a close knowledge of the markets will be more able to do deals than those at a distance.
'Cross-border deal volumes have fallen very sharply since the start of April, to the detriment of markets such as Warsaw, which has been dominated by cross-border capital and where just four deals have completed since April 1.'
