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| Turnover in German investment market set to outperform 2012, says Savills British property consultancy Savills forecasts that total turnover in the German commercial real estate market could reach the €30bn mark in 2013, significantly surpassing the 2012 volume of approximately €25.3bn. The firm attributes this rise to the high transaction volume expected in the second half of 2013 with a number of active major deals as well as an anticipated increase in activity in Berlin where a further rise in the real estate transfer tax will come into place in 2014. According to the international real estate advisor approximately €12.5bn was invested into commercial property in Germany during the first half of 2013, marking a 36% year-on-year rise and representing the strongest half year since H1 2008, when a volume of €12.9bn was recorded. "Germany's exceptional economic position is increasingly reflected on the local investment market and real estate as an asset class is becoming increasingly attractive the longer the interest rates remain low", comments Marcus Lemli, head of Savills Germany and head of European investment. Savills notes that there is ongoing demand from risk-averse investors who are looking to buy assets that retain their value in economically challenging times. Insurance firms, pension funds and superannuation schemes, which represent direct real estate investments of €1bn in H113, illustrate this trend. An even greater sum has been invested indirectly, predominantly through special funds. On aggregate these funds purchased German assets worth approximately €2.6bn in this period with at least half of this sum attributable to insurance companies. Since 2011 these investors have bought approximately €5.7bn of commercial assets in Germany with at least as much spent on indirect investments through funds and other vehicles. Hence they represent the most active group of buyers, with at least every fifth Euro invested into German real estate in this period attributable to direct or indirect investments made by insurance companies, pension funds and superannuation schemes. "Insurance companies currently play a very significant role on the German investment market and will continue to be one of the most important groups of investors going forward", concludes Lemli. Furthermore, Savills data reveals that private investors and listed property companies each accounted for €1.3bn of investment in H113. Developers were by far the most active party on the sell-side divesting property worth over €2.3bn, three times the total of the first six months of 2012, highlighting the strong demand for core properties in Germany. With developers also highly active on the buy-side, investing circa €900m, these investors appear to believe this high demand for class A product will continue for the time being. Matthias Pink, associate director of research at Savills Germany, says: "Currently the German property market with its manageable risk is extremely liquid and never before has such a large amount of equity been available for investments into core product." Demand for core and core-plus assets still exceeds available supply according to the firm, so that yields have decreased slightly in H113. Prime yields for both office and retail buildings in the top six German markets of Berlin, Frankfurt, Düsseldorf, Hamburg, Munich and Cologne have dropped by ten basis points on average, to 4.7% and 4.2% respectively. Yields for secondary CBD offices have likewise declined slightly to 5.5% on average, whereas yields for higher risk properties have remained unchanged. In terms of pricing, the firm notes that the gap between core and core-plus on the one hand and the value-add and opportunistic segment on the other has continued to widen. Lemli explains: "While there is a considerable surplus demand for core investments, buyers and vendors in the opportunistic segment still rarely come to an agreement due to differing price expectations. Going forward we anticipate some further differentiation with buyers more likely to meet asking prices for properties that are more future proof, for example by means of a refurbishment. Owners of assets lacking such prospects will, however, be forced to revise their expectations downwards, possibly following pressure from the borrowers involved. Even if the gap between asking and bidding prices closes in different ways this will result in increased investment activity on the higher-risk end of the market." write your comments about the article :: © 2013 Construction News :: home page |