The European Public Real Estate Association (EPRA) is determined to shake up the status quo in Germany, which has long been dominated by the unlisted, open-ended funds sector.

At the organisation's annual conference in September, CEO Philip Charls talked of the potential to double the market cap in Germany over the next five years. EPRA has since published a study showing listed markets outperforming their unlisted, open-ended counterparts over a period of 20 years.

It all coincides with a significant loss of faith in the 50-year-old open-ended fund (GOEF) model, and listed offers "a very competitive alternative", said Charls. If institutional investors were sufficiently concerned at not being able to withdraw their cash from these funds when they needed to, a mandatory minimum two-year holding period has made the structures even less attractive.

Speaking to IP Real Estate from the Merrill Lynch global real estate conference in New York, Urdang portfolio manager Alan Supple claimed pension funds were "still smarting" from not being able to raise cash via GOEF redemptions.

"Even if they're still committed to indirect because of better returns, they're keenly aware of liquidity," he said. "These are strategic allocations - they'll probably hold real estate assets for the long term - but they still want short-term liquidity."

Of the €90bn still invested in open-ended funds, 30% of it is unavailable because the
funds have closed, according to Ralf Dibbern, investor relations spokesman for Alstria, a
German real estate investment trust (REIT). Alstria CEO Olivier Elamine has long called for regulatory intervention to encourage GOEFs to convert to REITs, citing Unibail-Rodamco as an example.

Unibail-Rodamco was one, became the other and survived the recent stock market volatility relatively unscathed. "The fact Unibail-Rodamco is trading at a premium says something about the quality of its assets," said Dick Boer, executive director of corporate finance for European real estate at Kempen.

The clincher for listed: there are few alternatives. The weekly deluge of new Spezialfonds targeting institutional investors does not solve the liquidity problem. "For the kind of liquidity these investors are after, there's no real alternative to an exchange-traded security," says Supple. "Most of us would argue that, with relatively low interest rates, the yield on listed real estate is still a pretty attractive proposition."

There is plenty of European property market to go round: potentially €1trn, according to EPRA, and listed only represents 1.5% of it. So how come? The primary reason is German institutional aversion to equities. Property companies like the German listed market because they have been able to raise €1bn in it over the past year. German institutional investors, on the other hand, do not. Equities account for 8% of overall fund investment.

Another caveat is that listed anticipates unlisted trends. What happens in listed happens quicker and harder, but sooner or later it will come round to unlisted. "It actually exaggerates the direction," says Boer. "You have much higher market volatility and higher swings."

Then, of course, there is volatility - although it is easy to draw the wrong conclusions from it. Boer reckons investors are offloading stocks with the greatest exposure to euro-zone sovereign risk, with some investors already having priced in the collapse of the euro. Yet German withdrawal from the euro-zone is more likely. "I don't think it will happen, but it would be great for investors," he said. "Real estate values would go up. Spain would devalue, and Germany would appreciate."

Another argument against the inevitability of a shift toward listed, according to Dibbern, is the vested interest of banks. Although listing GOEFs would significantly increase the volume of the listed German real estate sector - after all, one reason the listed sector is so small is because the unlisted sector is so big - if they were to list, the banks would lose their commission income.