Off-market real estate transactions attained a transaction volume of approximately €40 billion ($47 billion) in 2017, according to HPBA Off-Market Study.
With an institutional volume of approximately €70 billion ($81.4 billion) reported by brokers and professional real estate companies this would mean the off-market volume amounts to an additional market volume of nearly 60 percent. Viewed overall the commitment to off-market transactions is very high among the institutional actors, with 96 percent of the surveyed companies pursuing off-market transactions in 2017. This is the result of a targeted survey of managers of classic institutional investor groups such as real estate funds, insurers, pension funds and pension schemes, as well as managers from family offices, private equity investors and other institutional investor groups. The survey and analysis were conducted by bulwiengesa on behalf of HPBA. In total 682 persons were selected for the survey, which is the first analysis of the off-market segment for German real estate transactions.
“For the first time ever this study creates transparency in the off-market segment for real estate transactions in Germany,” said Andreas Schulten, a board member at bulwiengesa. The fact that the figures on the German real estate investment market available until now only reflect some of the driving forces is likely to be of interest not only to investors, but also to German urban development planners and business development agencies. Similarly, it seems obvious that financiers and credit institutions will devote greater attention to these figures.
“Ultimately this means, among other things, that the market liquidity is significantly higher than has been assumed to date,” said Schulten.
Investors: Price mark-up of as much as 10% appropriate with off-market transactions
One of the most important results of the study is that the certainty of execution with off-market models is significantly greater than with classical on-market procedures – and that for this reason many investors are also prepared to accept a price delta of as much as 10 per cent. Likewise it has been revealed that the strategic matching between the trade partners is more effective as a result of the individual structuring of off-market processes.
“In a keenly-fought market situation, such as that seen in recent years, investment criteria such as certainty of execution and strategic aspects for the buyer and seller are just as important as the simple purchase price,” explained John Amram, the managing director of HPBA. “Attaining the highest price is not always the decisive factor for the seller. Moreover, higher prices are often attained in the off-market segment than with classic bidding procedures,” says Amram.
Study rebuts preconceptions
Furthermore, the study rebuts a number of common preconceptions and possible fears on the part of market players. Thus, for example, there was no clear confirmation that off-market transactions are likely to be associated with a possible loss of transparency in the course of the process. Moreover, only in part of the cases are off-market transactions inconsistent with the in-house compliance rules of the protagonists.
Study results important for share deal segment
Not least of all the information is important for the current nationwide discussion of real estate share deals, the sale of companies with a significant share of their assets in the form of buildings and properties, therefore. It is possible that share deals are currently being transacted more frequently in the off-market segment than in the traditional market.
The HPBA Off-Market Study examines and measures the German market for off-market transactions. To this end a survey was conducted for the first time ever in 2017/2018.
