Investment activity picks up fresh momentum in the German retail property market

  • Transaction volume of €4.5 billion

  • German players account for more than two thirds of the overall investment volume

  • Single transactions determine market activity with a share of 75 percent

  • Retail warehouses / retail parks, along with supermarkets / discount stores by far the most sought-after asset classes

  • Net initial yield generally stable – significant declines for inner-city commercial buildings

According to analyses conducted by commercial real estate services company CBRE, some €4.5 billion was transacted in the German retail property investment market in the first half of 2016. Although the result has fallen approximately 52 percent below the stellar performance of the year-earlier period, this is due mainly to the Hudson’s Bay Company entering the German retail market with a deal going into the billions in the context of the Kaufhof takeover, as well as the takeover of the Corio shopping centres by French centre operator Klépierre. At the same time, however, the second-highest transaction volume in a second quarter since records began in 2009 was achieved.

Dr. Jan Linsin, Head of Research
Although the start to the year proved to be only moderate, the current figures show that last year’s high level of investment activity is set to continue with retail property as well.
Dr. Jan Linsin, Head of Research

“With an investment volume of €2.8 billion in the second quarter alone, the long-standing quarterly average of €2.4 billion was clearly exceeded. Nonetheless, we are also seeing the lack of availability of suitable assets still acting as a constraint and preventing the investment volume from going even higher, particularly as demand for German retail property is on the increase, driven by the robust condition of Germany’s economy and record employment figures, along with rising disposable income,” Linsin explains.

As in the year-earlier quarter, at more than €3.5 billion and a share of 79 percent, a large majority of the investments went into property outside the top locations.

Jan Dirk Poppinga, Head of Retail Investment
Limited supply, particularly in the core segment, places a clear constraint on the investment volume in the top locations, although investor interest in the relevant properties is still running at an uninterruptedly high level. For some time now, this has been the reason why we are seeing investors looking elsewhere and concentrating increasingly on attractive regional centres and secondary locations, while focusing here specifically more on existing properties with upside potential.
Jan Dirk Poppinga, Head of Retail Investment

Investment volume in retail property (in € billion)
















Source: CBRE Research, Q2 2016.

Retail warehouses / retail parks along with supermarkets / discount stores dominate market activity
Investment in retail warehouses and retail parks, as well as in supermarkets and discount stores clearly dominated the market in the first half of 2016. Strong demand in this segment is also attributable to the strategy of investors – prompted the scarce supply of shopping centres and inner-city commercial buildings in the top locations with correspondingly high purchase prices – of looking for other retail assets which generate stable cash flows. Retail warehouses, retail parks and food markets in particular are set to benefit from the current economic framework conditions with rising real wages and salaries and low interest rates, which is likely to be reflected by higher consumer spending, both in terms of covering short-term needs and purchasing consumer durables. An additional advantage consists of the net initial yields in this asset class which substantially outperform the prime yields of shopping centres or premium high street properties.

In the first six months of 2016, almost €2 billion, which is some 44 percent of all retail investment, were channelled into the retail warehouse and food markets segments as well as into retail parks. Along with various portfolio sales, such as the takeover of 63 retail warehouses and retail parks by GPEP together with Universal-Investment, and a portfolio of 20 EDEKA supermarkets which was acquired by MAS Real Estate, a number of other large-scale single transactions have also contributed to this high overall volume. TH Real Estate’s purchase of Huma Einkaufswelt in Schwabach and the acquisition of a share in the Gäubodenpark in Straubing by WCM Beteiligungs- und Grundbesitz-Aktiengesellschaft are transactions worth noting in the second quarter of 2016.

Second place was taken by shopping centres worth almost €1.1 billion, which represents a share of 24 percent. Apart from two properties in Hamburg and Munich, investments in this segment were largely made in properties outside the top locations, including centres in Fürth, Weinheim and Wiesbaden.

Investment in commercial buildings in inner-city locations follows in third place with a transaction volume of €917 million, which corresponds to a share of 20 percent in the overall retail property investment volume. Despite the property shortfall in the core segment, inner-city commercial buildings dominate market activity, especially in the investment centres: properties worth €452 million were sold in Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne and Munich, contributing 48 percent to the transaction volume in the top locations. Priority was given to well-situated properties with upside potential. From an investor standpoint, there is an opportunity here of responding to changed consumer patterns and of leveraging the potential of high street properties by adjusting the product and tenant mix or through structural concepts with refurbishment or redevelopment.

German players determine market activity on the buyer side
German players continue to be strongly committed in the domestic retail property investment market. Retail property worth €3.1 billion was purchased throughout Germany, equivalent to a share of 69 percent. Consequently, a share of 31 percent was attributable to foreign investors with funds of €1.4 billion. In the first half year, this group proved to be particularly active in the top markets where they contributed 61 percent of the overall transaction volume. Outside the investment centres, international investors accounted for a share of only 23 percent. By comparison, the ratio between domestic and international investors on the buyer side is much more balanced. While German investors sold properties for more than €2.3 billion (52 percent), foreign vendors disposed of property worth just under €2.2 billion (48 percent).

In terms of the buyers of retail property in Germany, the group of open-ended real estate and special funds were especially active, contributing €1.7 billion which is 38 percent of the overall investment volume. Asset and fund managers come second with approximately €1.1 billion, representing 24 percent of the overall volume. The other investor groups clearly lagged behind with shares respectively in the one-digit range in the overall volume. The group of asset and fund managers also dominated activities on the seller side. They sold property worth €1.5 billion, equivalent to 34 percent. Developers disposed of retail real estate worth €979 million, which puts them in second place with a share of 22 percent.

The good quarterly result is characterised by a high proportion of single transactions. At around €3.4 billion, 75 percent of the overall volume was invested in individual properties. The share of portfolio disposals stood at 25 percent, which is significantly lower than the prior-year figure of 67 percent, with major contributions to the high portfolio share from a number of large-scale property takeovers in the context of company transactions (Kaufhof, Corio).

Ongoing pressure on net initial yields – further decline anticipated over the course of 2016
Due to the high level of demand, accompanied by increasingly scarce supply, the yields of inner-city commercial buildings in the top locations of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne and Munich declined by 20 basis points on average to 3.63 percent in a quarter-on-quarter comparison. The yield decline for premium high street properties applies to all investment centres, most particularly, however, to Düsseldorf where prime yield contracted by 40 basis points to 3.50 percent, which puts the city in the range between Munich (3.25 percent) and the other top locations (3.75 percent). Moreover, at the end of the second quarter, the prime yields for other retail properties still held the level of the previous quarter. Consequently, shopping centres remained unchanged at 4.10 percent (class A location) and 4.80 percent (class B location). Retail parks and retail warehouses continue to generate 5.25 percent and 6.25 percent, as before. The only downturn reported was in the food supermarket segment where net initial yield dropped by 20 basis points to 5.80 percent, illustrating the huge demand for this investment product, above all by international investors, as well as increasingly by German institutional investors.

Outlook: investment momentum to accelerate in the second half of the year – yield compression set to continue
The investment market for German retail property gained significant momentum in the second quarter of 2016, suggesting a positive development in the remainder of the year. “Given the lack of alternative investment options and a highly liquid market, demand pressure from investors will remain at a steady, high level. As one of Europe’s largest retail markets with a polycentral structure, Germany offers manifold investment options here,” Linsin explains. “We anticipate that the share of international investors in particular will grow significantly over the course of the year and that Germany will continue to benefit from its role as a sustainable and safe haven,” Poppinga adds. “The strong presence of domestic investment companies in their own home market intensifies the competition for already scarce core properties and will continue to exert pressure on prime yields for retail property. We nevertheless expect a transaction volume in the clear double-digit billion range for the full year, especially as a number of larger single transactions, as well as various portfolios will be at the marketing stage in the second half of the year,” Poppinga comments.

Net prime yield trend* of retail property















*: Net initial yield
**: average net initial yield in Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne and Munich

Source: CBRE Research, Q2 2016.


Jan Dirk Poppinga
Head of Retail Investment
+49 (0)30 72 61 54 155

Dr. Jan Linsin
Head of Research Germany
+49 (0)69 17 00 77 663



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