Domestic investors step up activities for German hotel market

The German hotel investment market reported a transaction volume of €2.9 billion ($3.3 billion) in the first three quarters, according to CBRE Research. This was the same as last year’s volume.
“German investors stepped up their buying in the hotel real estate market in the first three quarters, investing a total of €1.55 billion [$1.79 billion], which reflects growth of 14 percent. At the same time, the volume committed by international investors dropped 12 percent to €1.3 billion [$1.5 billion],” says Olivia Kaussen, head of hotels at CBRE. “Despite the heightened activities of German investors who accounted for 66 percent of the transactions, deal sizes vary widely. The average single-deal size of international investors came in at around €36 million [$42 million], which is significantly higher than that of domestic investors at €21.6 million [$25 million].” Kaussen predicts that, “Given the transactions we are currently seeing in the market, we assume that the full-year result will not exceed the year-earlier figure.”
Supply shortage boosted property developments as well, while the lack of portfolios resulted in single deals. Property developments became even more important in the third quarter as well. All in all, the property development share stood at 26 percent, more than one-quarter of the entire transaction volume.
“The fact that the previous year’s transaction volume has been maintained despite the lower proportion of portfolio deals can be considered particularly positive. This underscores the ongoing strong interest of investors in the German hotel investment market,” Kaussen said.

The lack of supply is also reflected by the portfolio share. Over the course of the year to date, 18.3 percent of the transaction volume was attributable to portfolio transactions, down 18.7 percentage points compared with the year-earlier period.
Prime locations remain first choice of investors. However, a slight shift has taken place toward the smaller cities such as Cologne (up 149 percent), Düsseldorf (up 129 percent) and Stuttgart (up 1,193 percent) that have seen significant growth in their transaction volume. While the transaction volume in the Top 4 locations of Berlin, Munich, Frankfurt and Hamburg dropped by 7.5 percent, this figure climbed by as much as 9 percent in the Top 7 markets.

The table below shows the hotel investment market by buyer groups.

Source: CBRE Research, Q3 2018.