Around €77.3 billion ($89 billion) was invested in the German real estate investment market over the course of 2018, reported CBRE.
The commercial real estate investment market accounted for €60.1 billion ($69.22 billion) of this amount, thus even surpassing the former record result of €57.6 billion ($66.34 billion) from 2017 (up 6 percent). Another €17.2 billion ($19.8 billion) was attributable to the residential investment market that also saw substantial growth compared with the previous year (up 10 percent).
“The year 2018 set another record on the investment market for German commercial property,” said Fabian Klein, head of investment at CBRE Germany. “In particular, lively investor interest in commercial real estate in investment centers such as Frankfurt am Main, Berlin and Munich drove momentum. Office properties are especially attracting investor attention, not least due to great demand on the letting markets. At €17.2 billion, [$19.8billion] the residential investment market also delivered another strong result, thus exceeding the previous year’s figure. The German real estate market generally remains one of the most important target markets for domestic and international investors due to the promising macroeconomic fundamental data and interest rates running at a persistently low level.”
Office properties remain the strongest asset class with new record transaction volume
Especially major single transactions in the top locations and portfolio transactions across the nation ensured that office real estate, which accounted for €31.9 billion ($36.7 billion), or 41 percent of the overall volume, remains the asset class with the highest investment volume. In comparison with 2017, the sum total of capital invested in office real estate therefore climbed by 15 percent, thus outperforming all the other asset classes. The share of office real estate in the Top 7 German cities was even higher at 60 percent overall. Residential property (upward of 50 residential units) across Germany followed on with a transaction volume of €17.2 billion ($19.8 billion) and a share of 22 percent, and retail properties came in at €10.5 billion ($12.1 billion), which is just under 14 percent.
Investors focusing on real estate centers
The Top 7 locations of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart saw the investment volume increase significantly by a good €6.3 billion ($7.3 billion) in total, up 17 percent in a year-on-year comparison. Of the total German investment volume, 55 percent was therefore attributable to the country’s largest investment centers.
Domestic market players continue to channel a great deal of funds into the domestic market. At €46.5 billion ($53.6 billion), German investors contributed 60 percent to the overall volume in the country’s real estate investment market and have therefore once more raised their share compared with the previous year (53 percent). Along with European investors, investors from North America in particular (almost 9 percent) were especially active.
Outlook for 2019: transaction activity stable at a high level
“Given the German economy’s stable fundamental data, demand remains persistently strong and the German real estate investment market continues to top the list of real estate investors. Consequently, transaction activity will continue to run at a high level in 2019 as well despite speculation about a possible interest rate reversal, with the sole constraint being the lack of property suitable for investment,” Klein predicted.
Investment transaction volumes in Germany (commercial real estate; quarterly figures)
Top 7 investment markets (commercial real estate)
Yield spread office real estate vs 10Y government bonds
