German shopping centre yields rise in face of e-commerce challenge

Yields in German shopping centres have edged up 0.1 percentage points to 3.9% in a sign the sector continues to grapple with the popularity of online shopping.

The slight increase in shopping centre real estate yields in the first quarter of 2019 is notable because it is the first rise to be recorded for an asset class in some time, according to research by CBRE.

Elsewhere in the German real estate market, prime yields for retail parks dipped by 0.35 percentage points to 4.1%, while retail warehouse yields dropped 0.15 percentage points to 5.2%.

The reason shopping centres defied the downward trend in markets is that they are more exposed to the effects of e-commerce compared to fellow asset classes, according to Anne Gimpel, team leader of valuation advisory services at CBRE.

‘The reason for the higher yields for shopping centres lies in the doubt of some investors about the ability of shopping centres to master the challenges of e-commerce. In the case of retail warehouses that are often linked to food, however, these concerns are negligible,’ she said.

'Dramatic' decline in German RE investment

Separately, CBRE research found that investment in German real estate slumped by 30% year-on-year in the first three months of the 2019, with residential real estate seeing the steepest fall, down 56%.

Funds totalling €13.7 bn went into German real estate during the period, with office real estate remaining the most popular asset class at €5.5 bn investment, against a fall of 22% in transaction volumes. Meanwhile, in logistics properties, transaction volume fell 31%, according to CBRE research.

Fabian Klein, head of investment at CBRE Germany, counselled against reading too much in the slump in German real estate, saying: ‘The decline appears dramatic but, at a closer look, is nevertheless relative – demand remained high, but was not met by an adequate supply.

‘The first quarter of 2018 was one of the strongest on record particularly in the residential segment. Furthermore, the quarters ahead will see a number of properties and portfolios come on the market, which should fuel transaction activity again. The investment market will, however, presumably not be able to match the exceptional record volume of 2018 this year.’

Meanwhile, yields remained stable, the research found.


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