Investors poured €38.7 bn into German commercial real estate in the first three quarters of 2017, exceeding 2015’s 10-year record high of €38.2 bn, according to Colliers International.
According to the real estate advisor, it is increasingly likely that deals in 2017 will reach a new record of €55 bn by the end of th year.
'Foreign investors claim a key role in the strong boost we have seen in transaction volume,' commented Matthias Leube, CEO and head of capital markets at Colliers International Deutschland.
'Numerous investors will be taking advantage of the current market phase to realise upside potential by year's end. Continued low interest rates, a strong economy and rising rents will motivate both German and foreign investors to look to Germany despite rising purchase prices and limited supply.'
Between January and September, foreign investors poured more than €18 bn into German commercial assets, reflecting a year on year increase of 56% and a current market share of 48%.
EMEA supremacy
The largest influx of capital is currently being sourced from the EMEA region, continuing a trend that has been in evidence since 2012, according to Colliers. EMEA currently accounts for roughly €8 bn, reflecting a 22% share in total transaction volume. Investors from the US and Canada were a not too distant second, pouring €5 bn into German commercial assets, accounting for a 15% market share.
Investors from APAC currently account for the steepest increase in transaction volume at almost €4bn, only nine months into the current year, triple the five-year average. Colliers noted that Asian investors managed to boost their market share to 10%. Investors from China proved the most active, pouring more than €2 bn into German real estate assets alone with the takeover of the pan-European Logicor platform.
South Korean investors have also put almost €1 bn into landmark properties like Allianz Campus and Zalando headquarters in Berlin, T8 in Frankfurt and Telekom Tower in Bonn.
'We will most likely see additional capital, particularly from pension funds with high liquidity and funds based in Australia and Japan, targeting Germany in 2018,' added Leube. 'Assets offering higher returns than those in investor countries of origin will prove especially interesting, despite ongoing yield compression.'
Risk exposure varies
Regional differences in the countries of origin also impact how capital is invested in German real estate in terms of risk class. Investors from North America are currently reorienting themselves away from value-add and more toward core/core+ investments, Colliers said.
At the end of the first three quarters of 2017, this risk class accounted for a 65% share of US investments.
Asian investors in Germany are less willing to take risks, with 97% of their investments targeting core/core+ assets, according to the data, while just 47% of deals originating in EMEA targeted purely core assets.
'We believe that foreign capital will continue to boost transaction volume in Germany in Q4. We also expect to see new sources of capital, particularly from Australia and Japan, entering the market in 2018,' concluded Leube.
