German Real Estate Markets Property EU Germany Investment Briefing Dr. Thomas Beyerle London, September 6th 2016
SECTION European economy - Real Estate market in Europe European transaction volume vs. available capital EUR 700 Available capital for Real Estate Investments billion EUR 505 billion European transaction volume EUR 320 350 EUR 250 billion billion 300 300 250 EUR 250 290 - 250 250 320 200 billion 200 200 200 EUR 150 EUR 285 150 150 150 226 billion billion 100 100 EUR 100 100 140 billion 50 50 50 50 0 0 0 0 2007 2013 2015 2016 *All Assets: office, retail, industrial, hotel, residential Source: Catella Research 2015, IMF, FED, BIZ, Bloomberg, Deutsche Bundesbank, Thomson Reuter, INREV, RCA 2 Source: Catella Research, RCA
SECTION European economy Consumer spending drives economy • The ongoing moderate recovery is projected to continue, with GDP Annual development of gross domestic product, % growth reaching 1.7% in 2017. Sustained monetary stimulus and low oil 6.0 prices will support domestic demand, but the slowdown in emerging 4.0 market economies will weigh on exports. As a result, the large external 2.0 surplus will decrease slightly. The decline in unemployment should also 0.0 continue at a modest pace, but differences across euro area countries 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -2.0 will persist. -4.0 • Monetary policy should remain accommodative until inflation is clearly -6.0 rising to the target. Completion of the banking union would improve Germany EU-28 EU-19 monetary policy transmission and strengthen confidence. Countries with Unemployment rate, % fiscal space should use fiscal stimulus to support aggregate demand, especially through infrastructure investment. 12.0 • 10.0 Falling oil prices and improved purchasing power have meant that the European consumer has been a surprising driver of economic growth 8.0 over the last year. However, with the cost of oil now stabilising, the 6.0 labour market will need to provide more jobs and higher wage growth for 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 this trend to continue. • Germany EU-28 EU-19 Further monetary easing by the ECB has helped lending conditions and investment activity is showing some signs of life. That said, it remains a Consumer spending, % long way off pre-recession norms, a continuation of which will further hinder long-run growth potential. 4.0 3.0 • The UK’s EU referendum on June 23rd, threatens the departure of large 2.0 and influential member state. At the very least, this would lead to a 1.0 period of prolonged uncertainty regarding Britain’s relationship with the 0.0 EU. The crisis in Syria has heightened immigration concerns, which, 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -1.0 alongside stagnant wage growth and widening inequality, has given rise -2.0 to populist candidates and protectionist policies on both sides of the Atlantic. Germany EU-28 EU-19 3 Source: ECB, Eurostat, IMF, Catella Research
SECTION The German real estate market Key figures Commercial transaction volume QUICK STATS 1HY 2016 COMPARED TO 1HY 2015 In € billion 70 Commercial transaction € 18.1 billion 60 -33 % volume 50 Prime office yield 3.93% -35 bp (average TOP5) 40 Prime yield high street 3.45% -33 bp retail (average TOP 5) 30 Prime office yield 5.50% -20 bp 20 (average B-location) Prime yield Shopping 10 centre 4.35% -20 bp 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Prime yield logistic 5.95% -35 bp First half year Second half year Volume per type of asset in Germany Commercial transaction volume, TOP 5 markets 3,500 In € million 10,000 In € million 9,000 3,000 7602 2610 8,000 2,500 7,000 2100 2050 6,000 2,000 1650 5,000 4163 1,500 4,000 3,000 2172 1,000 801 1901 2,000 1357 905 500 1,000 0 0 Office Retail Industry Mixed use Hotel Others Berlin Dusseldorf Frankfurt Hamburg Munich 1HY 2013 1HY 2014 1HY 2015 1HY 2016 1HY 2013 1HY 2014 1HY 2015 1HY 2016 4 Source: Catella Research, RCA
SECTION The German real estate market Key figures TOP markets Cross-border proportion Top 5 markets • Cross border investments in German Top 5 markets decreased in the first half of 2016 to € 3.4 billion representing a share of 37% compared to 47% in the first half of 2015. The decline is not due to falling demand but rather a result of scarce supply. • Further on declining office prime yields in all Top 5 markets to a current average of 3.93%, 37% a decrease of 35 basis points compared to the previous year. 2016 1HY total Top 5 • The shift to 2nd tier locations have further established resulting in a further decline in yield volume € 9.2bn 63% spreads. In the course of the year we expect that the decline in risk premiums is likely to continue. • In short to medium term prime yields in the Top 5 markets will decrease further but at a domestic investors foreign investors slower pace, due to scarce supply and increasing demand shifting towards B-locations Office Prime – Yields (%) 6.00 5.50 5.00 2015 1HY 47% total Top 5 53% volume 4.50 € 11.2bn 4.00 3.50 3.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 Berlin Dusseldorf Frankfurt Hamburg Munich 5 Source: Catella Research, RCA
SECTION The German real estate market Key figures TOP markets Transaction volume by type of use • Acquisitions in German Top 5 markets reached a share of 51% of total investment volume in “Top 5” markets Germany in H1 2016. Last years share amounted to 46% in H1 2015. Nevertheless the volume in German Top 5 markets dropped by approx. 18%. 9% • Demand from investors remains very high. That the transaction volume was not greater is primarily 11% attributable to the fact that purchasers remain highly focused on core assets. 2016 1HY 6% total Top 5 • Demand for commercial property in Berlin continued unabated in the first half of 2016 and the boom volume € 9.2bn 61% 13% in demand is expected to persist in the second half of the year. However, since supply is clearly incapable of keeping pace with demand, further yield compression is expected. • Düsseldorf is currently witnessing high levels of construction activity, which will create further new investment opportunities, including large mixed-use quarters. Office Retail Industry Hotel Others • The transaction volume in Frankfurt’s commercial investment market declined markedly (-41%). This 5% was not attributable to a drop in demand but to a scarce supply of core properties. Many investors 8% are seeking properties with relatively secure income with long-term leases. This trend is also 3% expected to persist over the coming months. 2015 1HY total Top 5 21% • Many owners in Munich are refraining from selling, particularly in the core segment. Consequently, B- volume € 11.2bn 63% locations such as the Arnulfpark are attracting high levels of demand from investors, resulting in yield compression. Nevertheless, since the majority of purchasers remain risk-averse, peripheral locations with less favorable fundamentals are rarely benefiting from this shift in focus. 6 Source: Catella Research, RCA
SECTION The German real estate market Yield compression continues Prime market yields 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 10 YR government bond yields Office prime yield Retail prime yield • Demand for core-office properties is still high and even more and more investors are seeking for opportunities in 2ND – tier locations. Yields are expected to sharpen further supported by robust occupational fundamentals. • With the persistent lack of quality space and a development pipeline unlikely to satisfy rising occupier interest, the demand/supply imbalance is expected to continue across most prime locations in 2016. • In addition value-add properties with great upside potential enjoy higher interest. • Investors are looking for project developments with a low pre-lease rate to secure potential core assets at an early development stage as well. 7 Source: Catella Research
SECTION The German real estate market Yield bottom not yet reached Commercial transaction volume, Top 5 vs. Rest of Germany Office prime-yields Top 5 vs. B-locations € billion % 7.00 60.0 6.50 50.0 6.00 28.5 40.0 5.50 5.00 30.0 20.2 166 bp 14.0 4.50 20.0 11.7 12.0 4.00 10.1 26.8 10.0 19.8 3.50 16.7 5.5 13.7 11.1 4.37 9.2 5.0 3.5 3.00 0.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 TOP 5 B-locations Top 5 Rest of Germany • Prime office yields in German Top 5 markets decreased significantly in 2015 by approx. 40 basis points and marks the highest decline since 2006. • German B-locations also registered the strongest yield compression in the first quarter since 2010 by approx. 16 basis point compared to 2015. • Conversely the further reduction in returns on government bonds means that the gap to office prime yields remains at an historic high. • There will be even stronger yield compression in all non-core segments, such as all secondary and tertiary locations, markets outside of the the top locations and less liquid market segments. Consequently risk premiums will contract further. 8 Source: Catella Research,
Recommend
More recommend
