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Commercial real estate transaction volumes in Germany are expected to exceed €20 billion (RM79.96 billion) in 2012 with strong demand from both domestic and foreign investors, according to international real estate consultancy Savills. Its research found real estate worth about €22.6 billion changed ownership in Germany in 2011, marking a 20% rise from 2010 (€18.77 billion).
Savills Germany investment head Lars-Oliver Breuer in a recent press release says, “The final quarter of 2011 recorded the second best investment volume of the year at about €5.8 billion, showing little evidence of a deteriorating macro-economic environment. Given a number of uncertainties, it is difficult to provide an outlook for 2012 but what will be crucial is whether the situation in the financial markets stabilises and if the eurozone succeeds in convincing investors of its stability. Financing will be the predominant issue this year but if the continuously strong demand for German real estate can be translated into deals, the €20 billion mark is realistic for 2012.”
Savills research found that as in previous quarters, the retail sector dominated German markets in 4Q2011. Overall retail generated an investment volume of over €11 billion, making up almost half (49%) of total transactions in 2011 and representing an increase of 60% on 2010 (€6.93 billion). The office sector, which has historically dominated the German investment market, accounted for just below 35% of all transactions in 2011. Overall, the office market accounted for €6.58 billion of the investment volume in 2011, up from €4.88 billion in 2010.
“The reason for the increase in retail investment is partly due to the higher rental stability of retail properties. Investors who continue to focus on secure investments appreciate this characteristic. Another reason is the stable and currently very good consumer sentiment in Germany,” says Matthias Pink, head of research at Savills Germany.
Overall, almost half of Germany’s 2011 total transaction volume was invested in the leading five markets of Frankfurt, Berlin, Hamburg, Düsseldorf and Munich. Due to several large-volume deals, Frankfurt led the way by generating a single asset transaction volume of over €2.3 billion, making up 14% of the total German transaction volume. Munich also recorded growth — almost doubling its volume invested in single assets in 2011 to €1.6 billion. In Berlin (up 11%) and Hamburg (up 14%), the transaction volumes also increased albeit less significantly. However, in Düsseldorf, the transaction volume decreased by about 40% from 2010.
Foreign buyers made up about one third of buyers in 2011 with investors of Anglo-Saxon origin accounting for over half of all foreign investment. As in the first half of the year, open-ended and closed-ended funds were among the strongest buyer groups and jointly invested €7.6 billion. The second half of 2011 saw a notable increase in investment activity from insurance companies and pension funds as well as listed property companies and real estate investment trusts.
In terms of take-up, the five major office markets ended 2011 on a three-year high, according to Savills’ data. Total take-up reached about 2.85 million sq m, which is close to 2008 levels (about 2.9 million sq m).
Robert Kellershohn, managing director of Office Agency at Savills Germany, says “As expected, the record growth of Germany’s economy clearly stimulated office markets last year, which seem to have reached a cyclical high.”
Munich recorded the highest increase in take-up with over a 40% rise from 2010 to just below 850,000 sq m (9.1 million sq ft), followed by Hamburg with an increase of 10%. Berlin recorded a slight decrease (-3%) in take-up compared with the previous year, while Frankfurt and Düsseldorf’s take-up declined 13% and 16% respectively. The firm attributes the comparatively poor results of the latter two markets to the fact that in 2010 each of them had been largely characterised by a single large-scale transaction (ECB in Frankfurt, Vodafone in Düsseldorf). Demand in the small and medium-sized segments also exceeded 2010 levels in these markets.
High levels of demand for office space and a low number of new completions in 2011 led to a y-o-y reduction of vacancy rates in the overall German markets, with the exception of Düsseldorf where the rate remained unchanged. On average across the five key markets, the vacancy rate stood at just below 10% at end-2011, equating to 6.7 million sq m of vacant office space. Average rents remained largely stable across all markets in 2011 while most prime rents showed an upward trend. Given the scarcity of new developments and the fact that many tenants favour high quality offices, Savills believes prime rents have further upward potential over the coming months.
“In light of the economic parameters, it is most likely that the cyclical high is now behind us and demand for office space may decrease in the second half of 2012. However, this year’s completion figures will be lower than those of 2011 across all markets making it unlikely that vacancy rates will rise significantly or that average rental levels will decline noticeably, at least in the first half of the year,” says research head Pink.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 896, Feb 6-12, 2012
