Heavy fall in number of German retail investment deals
The latest report on the German retail property investment market from CBRE shows that in 2018, just €10.5bn of retail properties in Germany changed hands, marginally above the long-term average but nonetheless a decline of 25% compared with 2017.
CBRE said the transaction volume reflects current market challenges. “At €2.4bn, the final quarter was especially disappointing. Several larger deals were delayed and postponed until 2019,” said Jan Schönherr, co-head of Retail Investment at CBRE Germany.
“All in all, we anticipate the demand for retail property in 2019 at the level of the previous years, with investors continuing to focus on properties in the food market segment.”
The merger between department store groups Kaufhof and Karstadt in Q3 dominated the market in 2018, as “inner-city retail properties in top locations increased their share in the overall volume to 39% (€4.1bn)”, according to Jan Dirk Poppinga, co-head of retail investment at CBRE Germany.
“The proportion invested in shopping centres in particular declined significantly”, Poppinga added. “The disruptive change resulting from e-commerce is causing investors to adopt a reticent approach to shopping centres in B and C locations. Over the course of 2018, €1.3 billion was invested in shopping centres, corresponding to a share of only 13% in the overall volume. The year before, this figure stood at €2.7 billion (20%).”
“Retail warehouses and retail parks remain the dominant asset class with a transaction volume of €4.4 bn and a share of 42%,” Poppinga said. “Strong investor interest in retail warehouse properties is evident from the yields that slipped further toward the end of the year, particularly for retail parks.”
Despite the declines in volumes, international investors raised their share in investment activities by 5.0 percentage points, accounting for 42% of nationwide transactions. In the Top 7 locations, this share reached 53%.
Market activities tended to be directed more toward the metropolitan regions. The Top 7 locations’ deal share increased to 28% by year end, with Berlin alone registering transaction volume of more than €1bn.