Big slowdown for capital inflows into German indirect vehicles

Net capital inflows into German indirect property investment vehicles are down more than 6% year-on-year over the first nine months of 2016, according to new data compiled by Düsseldorf-based real estate capital markets consultancy Barkow Consulting.

For the nine months 2016 indirect real estate vehicles accounted for net capital inflows of €13bn, down 6% year-on-year. The inflow number includes listed real estate, institutional open-ended funds (OEFs) and public open-ended funds. The third quarter further emphasised the negative trend.

In particular, listed real estate inflows were very soft over the nine months, with equity placements totalling only €1.8bn. This is down fully 69% on 2015, primarily due to the consolidation wave in the industry. Three three-digit deals made most of the running here – Ado Properties, Hamborner and Alstria Office REIT, (reported on in these pages).

Net inflows into Public Open-Ended Funds came in at €6.3bn for the nine-month period, itself up 140% on last year. However the third quarter was down 56% on a like-for-like basis. The decision by three of the four largest fund managers in Q2 to remain closed for any new inflows is already having a noticeable impact.

REFIRE: On a wider note, the last eight years have seen a surge of capital inflows into the German listed real estate sector. Between June 2015 and October 2016 the market capitalisation of listed German property companies has risen 38% to €56bn, as a recent study by Barkow Consulting and German real estate lobby association ZIA shows. Given that 80% of the German listed sector is residential property, the shares have had a tremendous run over the past three years, in particular. The EPRA Nareit Germany index has risen fully 300% since the nadir during the financial crisis.

Against a background of warnings of overheating markets and increased calls for government intervention, it's perhaps not surprising that many listed stocks have taken a noticeable dip over the past three months.

However, as we note in several articles in this issue, listed companies are benefiting from rising rent levels and the investment thy have been making in improving the quality of the apartments in their housing stock, while lowering vacancy levels through capex, IT systems and streamlining their offering. With construction still falling well short of the estimated 400,000 new units required annually, pressure on the housing market is not going to disappear overnight.