Retail property: Foreign investors dominate Germany´s investment market with big-ticket trans

  • Transaction volumes grow by six percent to approximately 9.2 billion euros

  • International investors have doubled their investment volumes since 2013, boasting a 50-percent share of the market

  • Retail warehouses and supermarkets the most popular asset class

  • Capital invested in retail warehouses / retail warehouse parks and supermarkets / discounters exceeds shopping centre investments by one billion euros

Nearly 9.2 billion euros were invested in the German retail investment market in 2014. Year on year, this represents an increase by 500 million euros or around six percent. The fastest-selling quarter was Q4 with almost 2.9 billion euros. This is the upshot of the latest Investment Report compiled by the real estate consultancy firm CBRE. “The run on German retail property by foreign investors continues,” said Jan Dirk Poppinga, Head of Retail Investment at CBRE Germany. “Seven of the ten biggest deals of 2014 were transacted by international investors.”

Since 2013, international investors doubled the volume spent on German retail properties, bringing the total up to 4.5 billion euros. This means foreign investors account for nearly half of the investment total. Especially British players proved highly active, investing nearly 1.7 billion euros or 18 percent of the total volume. Their investments included the two large Sunrise (Silo E) portfolios as well as a package of 23 assets that were sold by Capital & Regional (Capreg) and Ares Management to Rockspring. French investors accounted for a market share of around ten percent by investing nearly one billion euros. The high result is largely explained by two equity investments of Unibail-Rodamco, one acquiring a stake in the CentrO Oberhausen shopping mall, the other one buying into shopping centre operator mfi Management für Immobilien AG and its retail assets. Third in line are US investors with more than 800 million euros or a nine percent share of the action. The most prominent one of their investments was the sale of the Christie portfolio by a joint venture between Morgan Stanley Real Estate Investing and Redos Real Estate, a transaction advised by CBRE.The share of portfolio deals rose sharply, as well over four billion euros were invested in portfolios and claimed a share or nearly 44 percent of the retail property transaction total. This is up from barely 2.7 billion euros or 31 percent the year before.

Retail Warehouses Topping Investors' Shopping List
Investments in retail warehouses and retail warehouse parks saw another increase year-on-year. Almost 3.8 billion euros or 41 percent were committed in this asset class, meaning 1.4 billion euros or nearly 60 percent more than in 2013. “Virtually all of these properties were located outside the prime locations, a fact that reflects the increased risk tolerance among investors,” said Poppinga. The largest investments in this segment included the acquisition of a supermarket portfolio from Taurus Investment Holding by a joint venture between Pramerica Real and Third Swedish National Pension Fund (AP3), which was also advised by CBRE, the buy-back of the Sokrates portfolio of ten real,- superstores by Metro AG, and the acquisition of an interest in around 350 Netto discounters from Moeller-Maersk by the Salling Group in Denmark.

Conversely, investments in prime retail property mainly high street units and shopping centre have declined noticeably. The capital earmarked for downtown high street units declined by 1.6 billion euros or nearly 26 percent year-on-year, and by 2.7 billion euros or roughly 24 percent for shopping centres, and this despite several large-scale deals such as the one transacted by Unibail-Rodamco, the sale of the Christie portfolio that included four malls in Brandenburg and Saxony, or the acquisition of the Kö-Galerie shopping centre in Düsseldorf by Allianz Real Estate, a transaction advised by CBRE. “All things considered, though, investment-grade product is in such short supply and investors have had to shift their focus to alternative retail property types, such as retail warehouses and retail warehouse parks,” as Poppinga elaborated.

Investors Move on the Smaller Towns
Roughly a quarter of all retail property investments targeted Germany's Top 5 cities. This equals a year-on-year decline by 26 percent. “Due to the short supply of product in the investment centres, and due to more attractive yield levels elsewhere, investors are increasingly gravitating to other locations,” said Poppinga. The only German cities that recorded increased investment volumes in the retail property sector were Munich (+18 percent) and Frankfurt (+9 percent). Düsseldorf registered but a modest decline in volume by four percent, whereas Hamburg (-16 percent) and most notably Berlin (-70 percent) reported plunging sales. The year before had still seen shopping centre and high street property sales – some of them sizeable – in a total value of more than 800 million euros. “Here, the short supply of product comes into play,” as Poppinga explained. “The market in Berlin registered only two transactions in the size category of 50 to 100 million euros, whereas no less than seven transactions of more than 50 million euros had gone ahead the year before.”

With nearly 2.7 billion euros or 29 percent of the total amount invested, asset and fund managers were the leading group of buyers, followed by open-ended property funds and specifically institutional funds with 1.6 billion euros or 17 percent. Public property companies and REITs came in third at 1.3 billion euros (14 percent).

Prime Yields under Pressure across the Board
Prime yields in the retail segment have clearly come under pressure. For the time being, though, net initial yields for prime shopping centres in Germany's top markets remained stable at 4.5 percent quarter-on-quarter. Comparable products in prospering regional centres softened by another 0.2 percentage points to 5.1 percent during Q4, down from 5.4 percent by the end of 2013. In the segment of retail warehouse parks, keen demand and dwindling supply have precipitated a massive yield drop. By the end of the year, net initial yields stood at 5.7 percent (-30 basis points since Q4 2013). Prime yields for retail warehouses / supermarkets stood at 6.5 percent (down by 50 basis points); net initial yields for prime DIY store stood also at 6.5 percent – a decrease of 75 basis points compared to Q4 2013.

Outlook for 2015: Ten Billion Euros in Investments
“We expect to see an investment volume of approximately ten billion euros in 2015,” said Jan Linsin, Head of Research at CBRE Germany. “Investors' willingness to embrace the risk of large-scale retail packages – even if they include opportunistic product – has continued to grow. Moreover, domestic investors have great faith in the German retail property market's stability of value, and international investors even more so.” Outstanding fundamentals, a labour market characterised by record employment figures, and above all the low inflation will boost sales, thereby laying the ground for attractive opportunities and encouraging property allocations in this segment, according to CBRE.


Jan Dirk Poppinga
Head of Retail Investment Germany
+49 30 72 61 54 155

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


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