Retail demand unbroken, despite lower transaction levels

A new report from inner-city retail broker COMFORT shows how the multiples at which German commercial properties are changing hands have been increasing in two-thirds of the cities surveyed.

Of the 146 cities analysed from the COMFORT database, by September 2016 a total of 98 cities were showing a rise in the multiple compared to a year ago. Of these, 52 showed a rise of less than 0.52, while in 46 cities it was higher. In only two cities was the multiple less than a year ago – in the cities of Recklinghausen and Remscheid, which COMFORT believes is due to exceptional circumstances.

In the seven top cities in Germany the multiple for high street properties is above 25 (i.e. 25 times the annual rent), while in a further 27 they are trading at between 20 and 25 times rent. According to Jürgen Kreutz, head of investment at COMFORT, the rental markets simply cannot keep up with the demand dynamics of the investment market, making it all the more important to make realistic estimates of the long-term achievable rent in a retail investment.