• Investment volume of €4.3 billion in the first nine months of 2023 – 38 percent lower year on year
• Prime yields climb in a range of 0.6 to 1.12 percentage points in the last twelve months, depending on the segment
• Retail warehouses and retail parks capture a share 55 percent

Germany’s retail real estate market registered a transaction volume of €4.3 billion in the first three quarters of 2023. Although the result marked a year-on-year decline of 38 percent, the segment nevertheless ranked in second place on Germany’s real estate investment market, along with logistics. Of the transaction volume, 36 percent was attributable to the Top 7 cities, up 13 percentage points compared with the previous year’s period. The largest deal in the year to date and in the third quarter across all asset classes was the sale of the entire X+Bricks portfolio (188 properties) for more than one billion euros to investment and asset manager Slate Asset Management. This is the conclusion drawn in a current analysis prepared by the global commercial real estate services company CBRE.

The largest share in the transaction volume was attributable to retail warehouses and retail parks that together took a share of 55 percent, also due to the X+Bricks transaction. High street properties with 35 percent ranked in second place in the retail segment. Shopping centers accounted for only a good five percent.

German institutional investors in particular remain especially cautious. By contrast, international investors upped their share in the retail transaction market by 23 percentage points to 58 percent. Greater market activity was also discerned from high net worth family offices and private individuals.

Yields trending up – but more slowly

Moreover, financing interest, measured in reference to the 5-year EURO Swap Rate for instance, currently stands at 3.4 percent and the risk-free rate in the form of the 10-year Bund at more than three percent at the last count. The benchmark yield alone has gained two percentage points in the last 18 months. Investors are pricing this yield uptrend into their potential real estate allocations and are consequently demanding an adequate risk premium to compensate for the risks of investing in tangible assets.

Shopping centers in prime locations recorded the sharpest growth, advancing 0.4 percentage points to 5.5 percent. Shopping centers in B locations climbed by 0.35 percentage points to 6.85 percent. High street properties in the top markets saw prime yield increase by 0.3 percentage points to 4.54 percent, while retail parks have clocked up 0.25 percentage points to currently five percent.

Outlook for the full year 2023

“The investment volume on the retail real estate market should move in the direction of six billion euros over the remainder of the year,” Schönherr says in anticipation. “This is considerably less than in as recently as 2022. That said, the segment will probably secure first place among the commercial real estate asset classes. In the coming months, investors will enjoy attractive opportunities, particularly in the large-scale segment, as a range of different products are due to come on the market.”