German retail properties continued to be popular with investors in Q2 2015. Between April and June they invested almost € 6.1 bn into this particular sector and boosted the half-year turnover to over € 9.5 bn, which is almost twice as much as in the first half of 2014.
German retail properties continued to be popular with investors in Q2 2015. Between April and June they invested almost € 6.1 bn into this particular sector and boosted the half-year turnover to over € 9.5 bn, which is almost twice as much as in the first half of 2014. Even the total transaction volume of 2014 (approx. € 9.0 bn) has already been exceeded within the first six months of 2015. “Very strong demand on the one hand and a broad supply on the other result in incredibly strong dynamics in the retail investment market”, explains Jörg Krechky, director and head of retail investment Germany at Savills.
Over the past few months the transaction activity largely took place in the portfolio sector. Almost two thirds of the total transaction volume was achieved by way of portfolio transactions. The largest transaction was the sale of the Kaufhof department stores package for approx. € 2.4 bn, followed by the takeover of Corio by Klépierre (approx. € 1.1 bn) concluded in Q1. As a result of the Kaufhof deal department stores were the strongest-performing property type totaling just below € 2.7 bn, closely followed by prime high-street buildings (circa € 2.5 bn) and shopping centres (circa € 2.3 bn). With investments of over € 800 m retail parks likewise recorded a clear plus in turnover year-on-year.
The funds for these investments originate from a variety of regions with domestic investors representing the largest group of buyers at almost a quarter of the transaction volume. As a result of the two major transactions mentioned above French (20%), Canadian (19%) and US buyers (18%) follow immediately behind. “Although Asian capital has not yet been successful in retail investments Asian investors were and are among the bidders for various larger opportunities”, outlines Andreas Wende, COO and Head of Investment Germany at Savills.
Despite the large number of successfully concluded transactions, Savills reports further numerous single assets and portfolios are in the market. With over twenty shopping centres amongst others, the transaction volume is likely to record above-average levels in the second half of the year as well. The 2015 total transaction volume will most likely add up to a minimum of € 15 bn which would mark an almost 70% increase year-on-year. Given the ongoing very strong demand the yields continue to be under pressure albeit in terms of shopping centres the cyclical low may already have been reached. On average across the top seven markets the prime shopping centre yields were at 4.2% at the end of June – in a number of cities including Munich even clearly below 4%.
“The German shopping centre market is largely mature. As online sales gain ground in a growing number of retail areas relevant to shopping centres there is little any chance for rental growth. In consequence there is little room for further yield compression left”, says Matthias Pink, director and head of research for Germany at Savills. Savills predicts retail warehouses and retail parks will probably become an even greater focus for investors which will make yields drop further in this segment. “Given the higher food share in the total turnover retail parks are more online resistant and hence an attractive option for investors”, notices Jörg Krechky. The currently high initial yields of 5.3% are therefore likely to hit or even fall below the 5% mark during the further course of the year.