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Impact Investing

IPE special report May 2018

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International investors return to German real estate market

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GERMANY – Transaction volumes in the German property market are continuing to grow mainly due to heightened interest from international investors, according to Deutsche Hypo.

A report by the mortgage bank found that investment activity reached €59bn in 2012, comparable with transaction levels in 2004, but still below the €110bn annual volumes of 2006 and 2007.

After the financial crisis, the share of foreign investors had fallen to 8%, but it is now back up to 40%.

The report said international investors such as private equity companies were "by far the most important stakeholders on the German real estate investment market", followed by real estate Spezialfonds, insurers and Pensionskassen, real estate listed companies and REITs, open-ended real estate funds, real estate leasing funds and closed-end funds.

The findings were revealed at the same time that opportunistic Swiss-based fund manager Corestate Capital announced it had acquired €290m in "German stressed property acquisitions".

The portfolio deal included six office buildings with steady cash flows and debt restructuring and redevelopment potential, and 6,000 residential units acquired from a forced administration.

The acquisition follows recent deals by Austrian Erste Bank for large portfolios of residential assets.

Andreas Pohl, board member at Deutsche Hypo, said Germany's reputation as a safe haven has been "strengthened further" because of the economic environment and the opportunities for attractive real estate investments, as spreads over other investments were at an all-time high.

Deutsche Hypo expects transaction volumes for the whole of 2013 to reach a similar level to last year.

However, over the medium term, an "overheating of the market cannot be ruled out completely", as investors' risk appetite is returning.

It also said the supply of core real estate was "fading", but that foreign investors still had an "overabundance of liquidity" to invest.

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