BEOS study claims higher returns on corporate real estate

A new study produced by the Berlin-based fund manager BEOS, and real estate market research group BulwienGesa claims that the returns on German corporate real estate are considerably higher than on office or retail properties.

The Germany logistics segment, which includes much of what we call corporate real estate, has returned 7.6% over a ten-year holding period, according to the study. This is about 2% more than the return on office or retail. According to Dr. Ingo Holz, the chairman of BEOS, “Dividend-oriented investors are primarily interested in the level and stability of returns on commercial property – and here, rental returns on corporate real estate have proven to be extremely stable. Since the year 2000, rental yields on corporate property have given up only 30 basis points to their current 8%. Over the same time period, yields on other sectors such as office and retail have been both much more volatile and offer lower yields, at currently about 6%.”

Leaving aside the natural bias of BEOS, which itself specialises in identifying and refurbishing industrial real estate, the study makes a persuasive case by highlighting the strong longer-term performance of corporate real estate based on high cash-flow returns, balanced by low risk of big write-offs and moderate price appreciation.

Holz attributes the higher returns to the plus points of corporate property, as being “the multiple various uses of such property across a broad spectrum of rents and differing lease lengths. You really do have to play a more active asset management role, but this consistently reduces the danger of unwanted vacancies and volatile income flows.”