German real estate investors could have realised far better long-term returns if a large, dynamic, listed corporate real estate sector had existed in Germany, comparable with neighbouring economies. That is one of the key conclusions of a recent study commissioned by the European Public Real Estate Association (EPRA) shows.
German real estate investors could have realised far better long-term returns if a large, dynamic, listed corporate real estate sector had existed in Germany, comparable with neighbouring economies. That is one of the key conclusions of a recent study commissioned by the European Public Real Estate Association (EPRA) shows.
Philip Charls, EPRA chief executive, said: 'Our study concludes that the restrictions on the development of a vibrant listed German real estate sector, as exists in every other major economy worldwide, appear to have cost investors dearly in terms of long-term property investment performance.'
Charls was speaking at the German Share Initiative Conference organised by the national property association ZIA in Frankfurt.
The EPRA study compared the total investment returns of the open-ended property funds, as the dominant non-listed real estate investment vehicle in the German market, with the performance of real estate equities for a period of about 20 years since 1989.
The study showed that the average annual return of the EPRA/NAREIT Eurozone Total Return Index has been 7.2% since 1989, compared with 5% for the German open-ended funds. The funds also have hefty multi-layered costs, including up-front fees and share and property transaction fees, while their listed peers are subject to minimal investment costs, according to EPRA.
The German open-ended fund sector has assets of around EUR 85 bn, with approximately 30% of the market currently closed for redemptions due to the liquidity problems the investment vehicles have experienced in the past few years. In comparison, the listed real estate sector in Germany is much smaller at between EUR 10 bn and EUR 12 bn in terms of market capitalisation, or approximately 1.5% of the total underlying property investment markets estimated at EUR 1 tln.
The research was carried out by Steffen Sebastian, professor of real estate finance at the International Real Estate Business School (IREBS), University of Regensburg, Germany.
