Commercial investments are heading to Germany, here’s why
Germany has been shortlisted by investors as an investment hotspot for commercial real estate and Merkel’s motherland hasn’t finished championing the EU states with its economic and political stability,
Tens of billions every year
This European powerhouse shows growing investments into commercial property year on year: €39.8 billion in 2014, 31% more than the previous year.
According to JLL, average investments from 2010 to 2014 amounted to €6.93 billion per quarter. They reached €9.5 billion in Q1 2015 (1.4 times the average), just 5% of the Q1 2014 €10 billion total.
The residential property market hasn’t been left out either, it has been increasing continuously since 2010, peaking at €16 billion in 2013. With investments reaching €3 billion in 2009 and 2010, experts expect this year to surpass a number of record highs.
€10.9 billion had already been injected into residential property in Q1 2015 alone, JLL reports. Weighing in at 80% of last year’s investment volume, this is the best first quarter result for the country in recent years.
Demand: nowhere left but up?
Anna Kurianovich, investment advisor at Tranio, has
Offices take the lion’s share
Office space is attracting the most investments in the commercial real estate market, accounting
Investments into other segments are minor: 8% for warehouses, industrial premises as well as hotels and 3% for construction sites.
While there is a dominant real estate segment in each city according to Savills, i.e. retail in Berlin and Stuttgart, office space in Hamburg, Düsseldorf, Munich and Frankfurt and logistic hubs in Cologne, office space remains the most popular throughout the country.
Foreign capital fuelling the commercial market
JLL reports a jump in the market share of foreign investors buying Germany’s commercial property, rising from 10% in 2009 to over 50% in Q1 2015, and experts says it’s not over yet. Forecasts predict a steady inflow of foreign capital throughout the year, particularly from Asian and Middle Eastern institutional investors. Unsurprisingly however, nearly half of all acquisitions in 2014 were German (48%), 15% from the USA, 9% and 6% by the Brits and French respectively.
The most marked difference remains the share of foreign investments in the German property market. With only 8%
According to Savills, the main buyers of commercial property in Germany are special purpose public investment funds, other asset management companies, listed real estate companies, private equity funds, insurance companies and pension funds. The main sellers are developers, property management companies, special purpose public and private investment funds and private equity funds.
The Big Seven market leaders
Now over 50% of all the commercial real estate transactions are made in the “Big Seven”: Cologne, Düsseldorf,
The first quarter of 2015, however, shows that investors have not made their final choice. Berlin moved into first place with investments of €1.3 billion (14%) in Q1 2015, an increase of 113% against the same period last year. Munich stays steady second with €1.2 billion.
At the same time, the Big Seven’s residential housing market is also popular but investors are branching out into towns too: Gelsenkirchen, Mönchengladbach, Zwickau etc. This appetite for risk will deliver higher returns
Anna Kurianovich from Tranio explains that real estate in large cities has higher liquidity and lower risk affecting demand. “It’s believed that investments into locations with a population
George Kachmazov, Tranio’s founder and managing partner, confirms: “Real estate in Germany will continue to attract domestic and foreign investors. Germany is the EU's largest economy and a focal point for many major and successful companies, which ensures high demand for commercial property and consequently intense interest from investors.
Yulia Kozhevnikova, Tranio