German transaction volume to beat €20 billion mark in 2012

International real estate advisor Savills predicts transaction volumes for Germany’s commercial real estate market will exceed €20 billion in 2012 with continued strong demand from both domestic and foreign investors. According to the firm’s research real estate worth approximately €22.6bn changed ownership in Germany in 2011, marking a 20% increase on 2010 (€18.77bn). 

Lars-Oliver Breuer, Head of Investment at Savills Germany, says: “The final quarter of 2011 recorded the second best investment volume of the year at approximately €5.8bn, showing little evidence in the investment market of a deteriorating macro-economic environment.  Given a number of uncertainties it is difficult to provide an outlook to 2012 but what will be crucial is whether the situation in the financial markets stabilises and if the Eurozone succeeds in convincing investors of its stability. Financing will be the predominant issue this year but if the continuously strong demand for German real estate can be translated into deals the 20 billion mark is realistic for 2012.”

Savills research shows that as in previous quarters the retail sector dominated German markets in Q411.Overall retail generated an investment volume of over €11bn, making up almost half (49%) of total transactions in 2011 and representing an increase of 60% on 2010 (€6.93bn). The office sector, which has historically dominated the German investment market, accounted for just below 35% of all transactions in 2011. Overall offices accounted for €6.58bn of the investment volume in 2011, up from €4.88bn in 2010.

Matthias Pink, Head of Research at Savills Germany, says: “The reason for the increase in retail investment is partly due to the higher rental stability of retail properties. Investors who continue to focus on secure investments appreciate this characteristic.  Another reason is the stable and currently very good consumer sentiment in Germany.”

Overall almost half of Germany’s 2011 total transaction volume was invested in the leading five markets of Frankfurt, Berlin, Hamburg, Düsseldorf and Munich.  Due to several large-volume deals Frankfurt led the way generating a single asset transaction volume of over €2.3bn, making up 14% of the total German transaction volume. Munich also recorded a strong increase almost doubling its volume invested in single assets in 2011 to €1.6 bn. In Berlin (+ 11%) and Hamburg (+ 14%) the transaction volumes also increased, albeit less significantly. In Düsseldorf the transaction volume decreased by approximately 40% compared to 2010.

The share of foreign buyers was approximately one third in 2011 with investors of Anglo-Saxon origin accounting for over half of all foreign investment. As in the first half of the year open-ended and closed-ended funds were among the strongest buyer groups and jointly invested €7.6 bn. The second half of 2011 saw a notable increase in investment activity from insurance companies and pension funds as well as listed property companies and REITs.

German investment market 2011 at a glance