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German investment headed for €50 billion in 2021: Savills

Commercial property transaction volumes in Germany totalled €59bn in 2020, just 6% below the five-year average, according to Savills.

Because many investors are unlikely to have hit their acquisition targets last year, and could receive even more capital targeting stable income this year, volumes in 2021 could once again reach €50bn, the firm said.

Savills’ CEO Germany and head of investment Europe Marcus Lemli (pictured above) said that in view of pressure to invest and increased risk in the occupier market, “we believe the strategies of individual investors beyond the lowest common denominator of ‘logistics, residential and AAA offices’ will become more differentiated.”

Lemli added that many investors are likely to consider any downturn in the capital values of offices in B-locations as “a counter-cyclical opportunity for acquisitions”. Others will regard the same properties as having excessive long-term risk.

Lemli said that a large proportion of demand is concentrated on properties that offer stable cash flow during the crisis and beyond. “This includes logistics assets and offices let on long leases to public sector tenants or other occupiers with strong covenants as well as niche properties such as data centres.”

Yields in these sectors hardened further during the course of last year, said Lemli adding that the prime yield for logistics properties stood at 3.5% at the end of 2020, 20 basis points lower than the corresponding figure in 2019.

The prime yield for supermarkets also hardened by 20 bps. Conversely, yields for shopping centres and retail parks softened by 70 and 35 bps respectively.

The proportion of German investors rose last year, partly due to travel restrictions. Domestic buyers accounted for around 57% of the investment volume, which is the highest proportion since 2013. Approximately 71% of foreign capital originated from Europe, followed by around 21% from North America and the rest from the Middle East and Asia.