German residential deals now mainly in B-cities – Study
A new study by Frankfurt-based residential brokers Dr. Lübke & Kelber shows that German residential investment volume reached €9.7bn in the first nine months of this year, up 14% on last year. Of this, 82% (140,300 units) was transacted in so-called B-cities due to high prices and stiffer competition in Germany’s biggest cities.
According to long-term CEO Ulrich Jacke, “The German housing market continues to attract enormous interest from institutional investors. Due to the continued competition and an increasing price sensibility, B cities are especially moving into investor focus. This is where they find a better risk-return profile in the residential sector.” The has also had the side-effect of lowering the average transaction costs per deal, which fell to €56,900 or 13% lower than last year.
Some 78% of investors were German groups, down from 83%. The most active foreign investor groups were the Austrians, with a 10% share, mainly due to the newly-listed BUWOG buying 18,000 units for €900m. Listed firms or REITs took up a 56% share of total volume. “The six largest transactions were done by stock exchange-listed companies,” said Jacke. These deals account for 48% of total volume. The largest one in 3Q14 was the sale of the 13,300 Berlinovo flats to Berlin-based Westgrund for €390m.
“Due to the lack of large portfolio offers on the market, activity for the rest of the year should remain moderate,” said Jacke. He expects a full-year volume of €12bn, about the same level as last year. B-cities are set to continue attracting investors with competition being far lower than in A-locations. Germans should dominate the segment, as international investors remain focused on the larger urban centres.
Dr. Lübke & Kelber is an independent property service company owned by its managers which is focused on asset management, asset acquisition and marketing and transaction advisory, with particular emphasis on the residential sector. It maintains six offices across Germany.