Research - OCTOBER 12, 2018

Strong third quarter boosts Germany’s 2018 retail numbers

by Marek Handzel

The German retail market has been given a significant boost in the third quarter of 2018 after registering €4.1 billion ($4.7 billion) in investment volume, taking the total amount allocated to Germany’s high streets and shopping centers to €8 billion ($9.2 billion) for the year so far.

CBRE says that the merger of department stores Kaufhof and Karstadt, as well as a strong interest in retail parks, helped increase transaction numbers.

“Investors continue to focus on the food market segment in particular as this is where most of the properties available in the market are to be found,” says Jan Schönherr, co-head of retail investment at CBRE Germany.

“As a result, the volume invested in retail parks was only exceeded by the major Kaufhof/Karstadt deal. In addition, we recorded a number of transactions involving shopping centers in the third quarter, a trend that is likely to hold steady in the final quarter as well.”

According to CBRE, investment volume in the country’s top seven locations climbed by 13 percent in a year-on-year comparison, meaning that their share of the overall transaction volume rose to 28 percent. This regional distortion has caused yields to fall further compared with the previous year’s period. City center commercial buildings in top locations average 3 percent and the prime yield for shopping centers in top locations has dropped by 20 basis points compared with the year-earlier quarter and is now running at 3.8 percent. Meanwhile, prime yield for retail parks is at 4.5 percent, down by 25 basis points.

CBRE adds that it anticipates a robust final quarter to 2018, with transaction volume reaching between €10 billion and €12 billion ($12 billion and $14 billion). Although this would fall short of the previous year’s outstanding €13.7 billion ($15.8 billion) result, it would still be above Germany’s 10-year average volume levels.

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