German retail deals pick up pace despite structural shift - Colliers

Activity in the German retail property market continued to pick up pace in the second quarter of 2019 with a transaction volume of €4.9bn at mid-year, according to Colliers International.

This represents the fourth best H1 result in the past ten years. H1 transaction volume also exceeded the 10-year average by 12%, which reflects the solid underlying trend. Transaction volume even saw a y-o-y increase of 39% due to a relatively weak H1 2018, the report said.

In terms of market share, the retail segment came in a clear second (20%) behind office assets (49%), outranking industrial and logistics assets (10%) as well as hotels and commercial land sites (7% each).

'Despite these results, the retail segment is still unable to fully tap the exceptional momentum we are seeing in the overall investment market in Germany,' said Dirk Hoenig-Ohnsorg, head of retail investment at Colliers International.

While 'the macroeconomic conditions for domestic trade remain extremely favourable', 'potentially higher demand for retail assets is being held back by disruptive changes in consumer behaviour and accompanying concerns', Hoenig-Ohnsorg added. 'This transformation, which can primarily be attributed to digitalization, is prompting investors to perform significantly more extensive and therefore lengthy analyses before buying a property.'

Major deals
With a volume of over €1 bn, the largest transaction in the retail segment was also the largest deal in the overall market. The deal involved the complete takeover of all 57 Kaufhof department stores, 50% of which the Austrian real estate company Signa had already acquired in the merger of Karstadt and Kaufhof last autumn, partly from the Canadian Hudson’s Bay Company and other joint venture partners and partly from Galeria Kaufhof.

This high-volume transaction increased the portfolio share at mid-year to 47%, or €2.3 bn in terms of volume, significantly higher than in the overall market (16%). The second and third largest deals were signed in Q1 for €280 mln and €265 mln, respectively. Königsbau-Passagen in Stuttgart and the Zoom office/retail property in Berlin were also the highest-volume single-asset deals signed in H1.

'Shopping centres, which are subject to more drastic changes coming from two different directions than other asset classes, are experiencing elevated pressure to reposition,' noted Hoenig-Ohnsorg. 'According to market studies, most of the shopping centres across Germany have not yet been restructured. All of this explains the current reluctance to invest in this asset type, which posted a transaction volume of €1.1 bn and a market share of 22% in the first half of the year.'


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