German investment dips despite spate of major deals

The series of large ticket investment deals announced in Germany in the last few days tends to endorse the view that, of all European markets, it is the least affected by the consequences of the current pandemic.

Tristan Capital Partners has just paid €284 million on behalf of its EPISO 5 fund for a 23-asset portfolio of mixed residential and commercial property, largely centred on Berlin.

KGAL Investment Management has bought the Perlach Plaza development, Munich.

Munich-based investment manager KGAL Investment Management yesterday announced that it is acquiring the Perlach Plaza development in that city on behalf of its AIF fund in a club deal with three institutional investors. The 30,000 sq m project on the east side of the city is expected to have a completed worth of €250 million and will provide hotel, retail, and student living space as well as 100 apartments.

These deals followed Warburg-HIH Invest Real Estate’s acquisition of the 26,000 m2 Campus Hamburg, a six-storey project under construction in Barmbek-Nord. Warburg HIH bought the asset from ECE for an undisclosed price which was reported by Thomas Daily to be around €150 million.

Meanwhile, Immofinanz  has sold the Panta Rhei office building at Düsseldorf airport to Deka Immobilien although the price of that deal has not been disclosed.

Germany not immune

Despite the scale and profile of these deals it seems that Germany is not immune to the economic malaise which is a consequence of the lockdowns necessary to combat Covid 19.

Research from Savills Germany reveals that transactions in the residential and commercial property markets declined in July with the number of sales falling 27% and transaction volumes and numbers at their lowest since August 2014.

The firm points out in its latest Market in Minutes report that during the four months following the start of the Covid-19 pandemic in Germany, office and residential properties were the most sought-after property categories measured by transaction volume. About 32% of the volume was attributable to office deals and residential accounted for 23% of the total. These proportions were the same as the 12 months preceding the pandemic (April 2019 to March 2020) say the authors of the Savills Germany report, Marcus Lemli, CEO Germany, and research associate Matti Schenk.

Pandemic boosts some sectors

However, other uses have become more important since the beginning of the pandemic such as industrial and logistics, which accounted for 10% of the volume between April and July, compared with around 7% in the previous 12 months. Food retail property saw its share increase from 5% to 9% and care homes’ share increased from 2% to 5%.

The overall ‘Retail’ category was the only sector in which the volume of investment transactions fell (-5.5%) against the August 2018 to July 2019 period. A similar comparison for offices shows 18.1% growth while residential grew by 66% and the sector as a whole by 24.4%.

Savills says that what unites the sectors in most demand is that they experience ‘comparatively stable occupier demand and will probably prove to be relatively resilient during the pandemic and afterwards.’

It can be assumed that these types of use will gain a greater weighting in the portfolios of many investors, the firm adds.

The RICS Global Commercial Property Monitor for Q2 2020 found that sentiment in the German investment market, indicated by its Investment Sentiment Index (ISI), slipped from -4 to -19 in the second quarter of 2020, with investment demand down in all sectors. The decline in industrial was more moderate compared to office and retail segments.

Capital value growth is only expected for first-class industrial property and data centres, RICS says. In most other segments, prices are expected to fall with, unsurprisingly, retail and hotels forecast to fare the worst.

RICS says most of those professionals surveyed are of the opinion that the commercial real estate market in Germany is currently in a downturn, with only 4% believing that the worst is over. ‘This is the first time that over 50% of those surveyed see the German cycle in a downturn,’ RICS said in a statement.

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