Investors in Germany should turn to niches, experts say

Investors interested in German real estate should be looking to less established locations, specialist assets, lower grade developments and even redevelopments, a panel of experts has told the industry.

Across logistics, retail and residential property, the more unusual locations and property types are being sought by investors, the panel told attendees of the PropertyEU Investment Briefing on Germany hosted by Henderson Global Investors in London on Tuesday.

Saul Goldstein, managing partner of Activum SG, said: ‘The things which don’t necessarily strike people as being interesting are becoming interesting. For the first time really we’re seeing the opportunity, in what’s perceived as being expensive markets, to redevelop office into residential. This had not existed in my 10 years in Germany until the last couple of years.'

The panellists agreed that the downturn has presented new opportunities because of the limited pipeline of new real estate development in all sectors.
Union Investment’s co-head of institutional property Karim Esch said there were still opportunities in the logistics market but that the focus was now on carefully selecting developments and locations.

He said: ‘What has been lacking is specialists. That’s why we’ve teamed up with specialist investors to try to understand certain markets better. The best logistics markets are not that obvious; places that wouldn’t be good for office or retail are perfect for logistics, like the Rhine-Neckar, Herford and Hanover areas.’

One very attractive niche to have emerged in the last five years, said Corpus Sireo director of international client management Kai Schubart, is healthcare. The specialist market, he said, has yet to reach maturity and is still ripe for investment from both domestic and international players.

He explained: ‘Like logistics, healthcare is still not at maturity. We find this market very open and productive, it’s a very interesting field to invest in. Not just in nursing homes but also medical office buildings. ‘The operators are becoming more and more professionalised and the whole market is reaching maturity.’

In terms of location, while investment into Germany has traditionally gravitated towards the major cities, Prime Office CFO Alexander Von Cramm said that in many cases investors should be looking to the less obvious places. ‘There are seven main cities in Germany that are dominating the investment markets, but there are other markets, in particular the university towns like Munster and Heidelberg. They have done extremely well,’ he said.

He added: ‘They’re extremely attractive for office and residential because that’s where the future entrepreneurs are being produced and they usually start businesses around the place that they go to university.’