German real estate deals hit €24.2b in 6 months

Properties in Germany's real estate investment market changed hands for around €24.2bn in the first half of 2019, research reveals.

The sum is 2.6% above the five year average, according to analysis by Savills. Meanwhile, yield differential with German government bonds is higher than at almost any time in the past, the advisor said.

Office properties accounted for 45% of overall investment with a transaction volume of almost €10.9bn. The retail sector ranked second with €5.9bn, or 24% of the total volume, followed by logistics and industrial properties, which were responsible for around €2.5bn (10%) of investment.

The transaction volume for logistics and industrial property declined by 32% year-on-year, while offices and retail property registered modest increases of 5% and 2% respectively.

German investors accounted for around 49% of the transaction volume over the last six months, which was around two percentage points below the five-year average.

The three most active foreign investors in the first half year were Luxembourg, the UK and Austria. Approximately two thirds of the overall transaction volume was attributable to three investor groups, namely funds and asset managers, open-ended special funds and property companies/REITs.

Marcus Lemli, CEO Germany and head of investment Europe for Savills, said: ’There is still no significant downturn in the commercial investment market on the horizon for the time being, even in the eleventh year of the super-cycle.

‘Prime yields on office property are currently around 340 basis points higher than those on ten-year German government bonds. This is the third highest differential in the last 30 years. Furthermore, not only have interest rate hikes been deferred, a rate cut is currently being discussed in the USA.

‘This will entail penalty interest on large short-term bank deposits and, consequently, investors will remain under high pressure to invest. Global capital flows into real estate are likely to continue and Germany will benefit as one of the most liquid markets.’

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