According to research from Savills, a total investment volume of approximately €9.9 billion was transacted in Germany during the first quarter of 2014, representing a 40% increase in turnover year-on-year and represents the second strongest first quarter ever recorded after Q1 2006, when more than €11 billion was transacted.
According to research from Savills, a total investment volume of approximately €9.9 billion was transacted in Germany during the first quarter of 2014, representing a 40% increase in turnover year-on-year and represents the second strongest first quarter ever recorded after Q1 2006, when more than €11 billion was transacted. Savills notes that this strong level of transactions maintains the significant market activity seen in the final quarter of 2013, traditionally the busiest period, when an investment volume in excess of €11.4 billion was recorded in Germany by the international real estate advisor.
Andreas Wende, COO and head of investment at Savills Germany, says: “The ongoing favourable financial and economic parameters are increasingly joined by a rising risk-embracing attitude of investors so that the investment market in Germany is now definitely no longer limited to core. This broader market activity is reflected in another year-on-year increase of the transaction volume.”
The data shows that every sector saw higher transaction volumes against the same period in 2013 with the most significant increase recorded in the warehouse and industrial segment (+154% yoy), followed by the office sector (+64% yoy). Nearly all sectors were boosted by portfolio deals, which accounted for over €4.3 billion of turnover according to Savills, representing 44% of the total turnover.
The firm suggests that these portfolio transactions were a key contributor to a significant rise in turnover recorded outside Germany’s top six markets of Berlin, Hamburg, Frankfurt, Düsseldorf, Cologne and Munich. Outside these markets Savills highlights that the Q1 2014 transaction volume doubled to €6.4 billion, from €3.2 billion in Q1 2013, of which almost €3 billion was attributable to portfolio transactions. By contrast turnover in Berlin, Düsseldorf and Frankfurt recorded a decrease of between 8% and 29% against Q1 2013 whilst Hamburg, Cologne and Munich recorded a yoy increase in investment turnover of between 12% and 17%.
According to the research the majority of the property portfolios were purchased by international investors in this period, increasing their market share to 55% (approximately €5.4 billion), up from 38% in Q1 2013. Of these buyers private equity funds represented the most active group investing almost €1.5 billion into commercial real estate in Germany in the first three months of the year.
Matthias Pink, in the research team at Savills Germany, comments: “The stronger commitment of opportunistic investors that we are seeing this year is having an affect on investor attitudes at the other end of the risk spectrum. The fact that core investors are prepared to take higher risks presents exit opportunities for opportunistic investors, an option which had not been available in the recent, extremely risk-averse environment.”
Overall, Savills data shows that open-ended special funds represented the most active group of buyers in the first quarter, spending circa €1.9 billion on acquisitions. Listed property companies / REITs ranked the third-largest group of buyers in this period according to the research, after special funds and private equity investors, with a purchase volume of circa €1 billion. On the sell-side open-ended special funds again lead with €2.1 billion of sales, followed by developers (approximately €1.5 billion) and private investors (€0.9 billion). Other important net sellers in this period were banks and the public sector, taking advantage of the good climate for targeted sales.
Andreas Wende adds: “Over the coming months we expect to see various large-scale transactions and the non-core segment is only just gaining momentum. This, combined with a continued improvement in market sentiment and the record amount of money that investors have available to invest in real estate leads us to anticipate an above-average investment volume over the quarters ahead. Total turnover by year end is likely to reach a minimum of €35 billion.”