OUTLOOK GERMANY: US capital drives German market, Asian money still to come

North American capital was the biggest driver behind the growth in cross-border capital flowing into the German real estate market in the first nine months of 2015, according to research from CBRE.

Presenting the data at PropertyEU's Outlook Briefing on Germany which was held in Frankfurt at end-November, Peter Schreppel, CEO Germany at CBRE, said the German market had become increasingly international in recent years in terms of sources of capital.

'The turning point came in 2003 when [US private equity giant] Blackstone entered the market, quickly followed by other American players,' he said.

The market is now virtually equally split between domestic and cross-border capital (47% versus 53%), with the scales tipping in favour of foreign money in the first three quarters of this year. In 2014, domestic investors accounted for 54% of the pie in the first three quarters, against 46% for foreign players.

North American money has been the biggest growth driver this year, accounting for €8.4 bn or just over 22% of the total invested in the first nine months. This compares with just €1.4 bn from Asia.

Schreppel: 'The western part of the world is strong, the eastern part is probably still to come. And we’re all still waiting for Australian money to hit European grounds.'

But, he added: ‘It’s not very easy to determine where the money is coming from because you will often have an American investor or fund manager on the front page [of a deal contract, ed.] and Asian money at the back. For example, we sold this building [OpernTurm in Frankfurt, ed.] to JP Morgan, but the money came from the Far East.’

Market experts had expected more Asian investors to move into the market this year and now hope the influx has yet to come. ‘We did three Asian deals this year which is okay but not great – and we haven’t seen any Japanese investors yet,’ said Derk Opitz, a partner with law firm Ashurst specialising in real estate and asset finance.

Panellist Daniel Mair, a partner in EY’s German restructuring practice, is optimistic that more Asian money will materialise: ‘There’s still plenty of hundreds of billions of Korean and Chinese money waiting to be deployed into Europe. I personally don’t think Japanese money will be very decisive for European real estate markets.’