German retail property attracted a €9.4 billion investment volume in the first three quarters of 2020, 32% up on the previous year.
However, according to research from CBRE the figure was primarily driven by a few large deals. These included various department store transactions and several grocery retail portfolio deals in the first half. SIGNA’s third-quarter portfolio acquisition from Quantum and a transaction between two ECE funds which saw three shopping centres change hands contributed to the high overall volume. This is the conclusion drawn in a current analysis prepared by the global commercial real estate services company CBRE.
But CBRE points out that, despite the seemingly large volume, Corona-19 is in the driving seat.
“The real estate adage of “location, location, location” has been replaced by “food, food, food” said CBRE Germany co-head of retail investment Jan Schönherr. “The tenants of food-anchored properties did not suffer any loss of revenue due to closures, and uncertainty about their future is not as great as it is with other sectors,” he said, adding that the firm is expecting “a conventional and broader-based market upswing in 2021 at the earliest.”
Retail businesses in Germany have delivered positive figures however. The German Federal Statistical Office said that in August retail revenues rose by 3.7% compared to the same month in 2019.
Insolvency rules restrict transactions
CBRE Germany Co-Head of Retail Investment Jan Dirk Poppinga said that Germany’s insolvency procedures are the context for low levels of investment activity in high streets and shopping centres. “As soon as this bankruptcy protection runs out, it will be easier for purchasers and vendors to resolve their currently mostly different ideas right now when it comes to prices,” he said.
Shopping centre yields have risen. Prime yields for shopping centres in A locations are 4.75%, an uptick of 0.25% points compared to Q2 2020. Prime yields for shopping centres in secondary locations have also increased by 0.25% points to their current 5.75%. Yields on retail warehouses, retail parks, DIY centres and high street shops remained stable compared with the second quarter of 2020. In the case of supermarkets, the Corona mark-up was reflected in 0.20% points fall quarter on quarter to 5.00 percent.
CBRE said the final quarter will be busy for retail investment which will exceed the long-term average of €11 billion
“The focus will remain on properties with a high food and drugstore content, with DIY centres as a source of a reliable cash flow also becoming increasingly important,” Schönherr added. The supply of food markets in particular could pick up more momentum he said.