Tumbling euro prompts investors to seek value in Germany - Savills

The falling value of the euro has boosted international interest in Germany’s property market, according to research by Savills.

Non-domestic investment accounted for 56% of the total volume in Q1 2015, up slightly from 53% a year earlier. However, overall investment still fell from €10.4 bn in the first quarter of 2014 to €9.2 bn, a contraction of 11.5%.

The largest share of foreign investors came from France, who invested €1.5 bn of the non-domestic total, followed by the UK and the US on €800 mln and €500 mln respectively. The input of the latter two indicates that non-euro buyers see Germany as offering value for money, according to Savills.

Matthias Pink, director and head of research at Savills Germany, said: ‘Due to the pronounced decrease of the euro exchange rate, real estate in Germany has become even more attractive to investors from other currency areas. This will most likely result in increased investment in 2015 from non-domestic investors.’

Savills predicts that the increased international interest will keep yield pressures high, with levels likely to fall by between 20 and 30 basis points across all sectors.

Big seven
Five of the seven main German markets saw an increase in investment, with Düsseldorf and Cologne the exceptions. Investment levels in Berlin soared from €617 mln in Q1 2014 to more than €1.3 bn a year later.

Retail was the strongest performer among the sectors, with total transaction volumes of almost €3.3 bln, one-third higher than Q1 2014. By contrast, office sales fell by 29% to €3.3 bn. Savills said retail sales were boosted by a number of portfolio transactions, including the takeover of Corio by Klépierre.

Andreas Wende, head of investment, said: 'Whilst the total investment volume has dropped slightly there are still a lot of good opportunities in the market. Those investors only focused on specific types of investments, like fully occupied grade A offices, maybe disappointed as demand far exceeds supply, but beyond this very tight core market there are numerous strong assets on the market.'