German retail investment market sees significant decline
In 2018, €10.5 billion ($12.1 billion) was channeled into retail properties in the German investment market, according to CBRE. While this result marginally exceeds the long-term average, it nevertheless represents a significant decline of 25 percent compared with 2017. Market activity was determined above all by the Kaufhof and Karstadt merger that took place in the third quarter of 2018.
“The decline in the retail transaction volume on the German market calls for a more discerning look,” said Jan Dirk Poppinga, co-head of retail investment at CBRE Germany. “While inner-city retail properties in top locations increased their share in the overall volume to 39 percent [€4.1 billion/$4.7 billion], with a major impact emanating from the merger between Karstadt and Kaufhof, the proportion invested in shopping centers in particular declined significantly. The disruptive change resulting from e-commerce is causing investors to adopt a reticent approach to shopping centers in B and C locations. Over the course of 2018, €1.3 billion [$1.5 billion] was invested in shopping centers, corresponding to a share of only 13 percent in the overall volume. The year before, this figure stood at €2.7 billion [20 percent/$3.1 billion]. Retail warehouses and retail parks remain the dominant asset class with a transaction volume of €4.4 billion [$5.1 billion] and a share of 42 percent. Strong investor interest in retail warehouse properties is evident from the yields that slipped further toward the end of the year, particularly for retail parks.”
Jan Schönherr, co-head of retail investment at CBRE Germany, added, “At €2.4 billion [$2.8 billion], the final quarter was especially disappointing. Several larger deals were delayed and postponed until 2019. All in all, we anticipate the demand for retail property in 2019 at the level of the previous years, with investors continuing to focus on properties in the food market segment.”
In comparison with the previous year, international investors raised their share in investment activities by 5 percentage points, accounting for 42 percent of the nationwide transactions. In the top seven locations of Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg, Munich and Stuttgart, this share even stood at 53 percent. Investors from neighboring European countries were especially active in Germany’s retail property market in 2018. On the buyer side, their share came in at 32 percent of the transaction volume. The proportion of the portfolio share edged up to 52 percent, reflecting growth of 2 percentage points.
Market activities tended to be directed more toward the metropolitan regions. The top seven locations’ share of the investment volume increased once again and stood at 28 percent at year-end. Berlin alone registered a transaction volume of more than €1 billion ($1.2 billion).
