Safe havens in Europe for real estate investors willing to look outside the comfort of their domestic market in these uncertain times are in short supply, and so is the kind of income-producing core, prime property that those investors are looking for. Brexit has removed the United Kingdom from the safe-haven shortlist, for the time being at least, leaving the usual suspects of France, Germany and the Nordic countries.
According to BNP Paribas Real Estate Germany, investment volume last year for Germany across all commercial real estate sectors was just under €52.6 billion, including an “explosive” final quarter of €19.6 billion. Office was the most popular sector, accounting for 44 percent of volume. Retail was in second place with 25 percent but substantial investment in hotels last year, €5.2 billion or 10 percent of volume, saw that sector’s 2015 record comfortably beaten.
Evidence of Germany’s safe-haven status was provided by the high 43 percent market share for international investors. European investors were the most active, with 23 percent of overall volume, followed by North American investors, with 14 percent.
“Investment in the major German cities — Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich — totalled €27.5 billion,” says Sven Stricker, head of investment at BNP Paribas Real Estate Germany. “Although that represented a modest year-on-year decline of 7 percent, it was still the third-best result ever registered. The lower turnover was due entirely to inadequate supply, especially in the large-unit core segment.
“After already falling appreciably in the course of the year, prime yields continued to ease somewhat in the final quarter,” Stricker continues. “This highlights the buoyant scale of investor interest and the ongoing increase in competition for attractive assets.” This is reflected particularly in Berlin and Munich, where prime office yields now stand at 3.30 percent.
With both domestic and international investors seeing Germany as a safe haven, competition for assets is fierce.
