-       Transaction volume of €1.7 billion in the first quarter, 15 percent above the year-earlier level

-       High street properties dominate market activity

-       Prime yields hold steady in the first quarter

In the first quarter of 2024, Germany’s retail real estate investment market achieved growth of 15 percent to €1.7 billion compared with the previous year’s period. This asset class therefore topped the league as the best performing segment on Germany’s real estate investment market. By contrast, the share of the Top 7 markets in the retail property market dropped 11 percentage points to 49 percent as opposed to portfolios that gained 11 percentage points while nevertheless remaining low at 23 percent. International investors also had a share of only 22 percent in the market (down 45 percentage points). This is the conclusion drawn in a current analysis prepared by the global commercial real estate services company CBRE.

Similarly, the ifo Business Climate Index, along with the GfK Consumer Confidence Barometer, recently improved noticeably.

Transaction activity was mainly determined by high street properties that captured 47 percent of the retail real estate investment market compared with only 31 percent in 2023. This development is principally attributable to two major transactions in Munich in an aggregated retail volume of approximately half a billion euros: Fünf Höfe and Maximilianstraße 12-14. Grocery-anchored retail warehouses and parks that followed on closely second place accounted for 45 percent in the first quarter of 2024 (Q1 2023: 58 percent).

No further increase in yields in the first quarter

Prime yields have remained stable across all segments since year-end 2023. Compared with the opening quarter of 2023, significant increases were recorded, however. Food markets achieved the lowest prime yields at 4.7 percent (up 0.2 percentage points), followed by high street properties in the Top 7 cities at 4.84 percent (up 0.75 percentage points). Retail parks came in at five percent (up 0.5 percentage points). Shopping centers in A locations produced prime yield of 5.9 percent (up 0.8 percentage points), which is considerably less than shopping centers in B locations (7.2 percent, up 0.7 percentage points).

“The fact that grocery-anchored properties are meanwhile delivering the lowest prime yields illustrates that e-commerce resilience can meanwhile be more important than a very good location,” explains Anne Gimpel, Team Leader Valuation Advisory Services at CBRE Germany.

Outlook for the remainder of the year

“In the coming months, especially in the second half of the year – and depending on the ECB’s interest rate decisions – we assume that the retail investment market will pick up momentum, prompting a growing number of transactions. Investors can already avail themselves of attractive investment opportunities, and all retail sub-asset classes will offer promising options for investing over the course of the year a whole,” Schönherr comments. “We put the transaction volume in 2024 at between five and seven billion euros, which will hinge on large-scale mixed-use sales and shopping center transactions taking place and on a recovery in the portfolio market.” 

“Inflation continues to fall in this country. According to official sources, the inflation rate in Germany is likely to have settled at 2.2 percent in March 2024, the lowest figure since April 2021. Although we do not expect the European Central Bank to cut interest rates at its upcoming meeting in April, the market is anticipating an initial move in this direction at its meeting next scheduled in June. The still cautious approach adopted by the European Central Bank confirms our opinion that interest rates will not be lowered before the summer. The European Central Bank is still concerned about persistently high inflation,” Linsin explains.