Residential Investment market heading for record year despite market stabilisation
Transaction total already at 18.2 billion euros by Q3 2015
Domestic investors continue to dominate residential investment market
Market action paced by small portfolio acquisitions
Limited supply prompts investors increasingly to shift their focus to property developments
Upcoming big-ticket takeovers in Q4 could drive 2015 transaction total up to an all-time high
The residential property segment continues to be one of the most popular investment choices on Germany's real estate market, and residential portfolio trading remains lively as a result. According to analyses conducted by the real estate consultancy firm CBRE, domestic and cross-border investors spent a total of 18.2 billion euros on housing packages and housing estates of 50 residential units or more during the first nine months of the year. Compared to the already rather dynamic first nine months of the previous year, this implies a year-on-year increase by 8.3 billion euros or 84 percent.
Judging by the number of transactions and by the transaction volume, trading during these first three quarters was mainly dominated by listed property companies from Germany, with registered portfolio transactions now up to 194 (up 17 percent year on year) and involving around 279,000 residential units (up 62 percent) with a combined residential floor area of nearly 17.4 million square metres.
The figures clearly illustrate the attractiveness of German residential real estate, which remains then as now one of the most popular asset classes on the real estate investment market.
While altogether 17 portfolios with a transaction volume of more than 100 million euros each were registered during H1 2015, the market action shifted to smaller portfolios of less than 100 million euros after the mid-year point, as 68 block sales were transacted during Q3. This explains why the Q3 transaction total, adding up to approximately 1.8 billion euros, was noticeably lower than the volumes of the first two quarters. That said, it should be added that the transaction activity during the first semester was paced primarily by large-scale company takeovers when Deutsche Annington acquired GAGFAH plus another 20,000 flats from Süddeutsche Wohnen (SüDeWo), and that the modest quarter-end turnover should rather be seen as a market stabilisation after the extremely dynamic trading during the year's opening months.
Domestic Investors Account for the Bulk of the Market Action – Property Developments Move Increasingly into Focus for Investors
The single biggest transactions during the third quarter included a portfolio in Berlin that a joint venture of KauriCAB Management and Apeiron Capital acquired for 100 million euros, and the acquisition of a projected residential/commercial building in Zollhafen/Mainz by Aberdeen Asset Management on behalf of a special fund. “Given the limited supply of existing properties on the market, we are seeing a growing willingness to invest in property developments, in addition to the increased investments in smaller portfolios,” said Jan Linsin, Head of Research at CBRE Germany. “Property developments accounted for nearly one third of the transaction volume registered in the course of Q3. With nearly eight percent, the focus here is on the residential investment market in Berlin because that market is virtually swept clean of property portfolios,” elaborated Michael Schlatterer, Team Leader Residential Valuation at CBRE Germany. The trends also explains the rise in square-metre prices, which jumped up by 10 percent year-on-year to a current price average of 1,050 euros. Analogously, the average purchase price realised for residential unit is 14 percent higher than it was twelve months ago, the going rate being 65,275 euros now.
“Given the favourable macro-economic prospects, and the persistently high demand, and considering moreover that several big-ticket takeovers such as the acquisition of LEG by Deutschen Wohnen are under way, we expect the German residential investment market to maintain its momentum during the fourth quarter,” said Linsin. Accordingly, the year-end transaction total of 2015 could by far exceed the historic banner year of 2005 in terms of housing packages traded.
Residential portfolio transactions in Germany (100 residential units or more)
Source: CBRE Research, 2015
Market for residential portfolios in Germany
Source: CBRE Research, 2015
Head of Residential Investment Germany
+49 69 17 00 77 29
Team Leader Residential Valuation
+49 30 726 154 156
Dr. Jan Linsin
Head of Research Germany
+49 69 17 00 77 663
CBRE Group, Inc. (NYSE: CBG) is a Fortune 500 and S&P 500 company domiciled in Los Angeles, California. It is the global leader in commercial real estate service by 2014 financial year revenues. With over 70,000 employees operating out of more than 400 branch offices worldwide (not including private equity partnerships and affiliate offices), CBRE provides services for commercial real estate owners, investors, and occupiers. The company's services focus on the areas capital markets, letting, valuation, corporate services, research, retail, investment management, property and project management, as well as building consultancy. Formed in 1973, CBRE Deutschland has its headquarters in Frankfurt am Main, and maintains branch offices in Berlin, Düsseldorf, Essen, Cologne, Hamburg, Munich, Nuremberg and Stuttgart. www.cbre.de