Austria focus of new investor attention

Markets

A new report by listed German property investor IVG draws attention to the rising interest among international investors in the Austrian real estate markets, but bemoans the fact that 80% of all commercial investment activity is focused on the capital, Vienna.

The country’s attractions as a safe haven and generator of stable yields exert the same appeal on risk-averse investors as its larger northern neighbour, but the cosy domestic investment community has now been rudely awakened by the arrival of foreign investors, notes IVG.

IVG research head Thomas Beyerle puts the overall investment volume in the alpine republic at about €23bn, albeit highly fragmented by comparison with Germany or the Netherlands. Institutional investors concentrate on commercial properties, rather than on residential portfolios, which don’t really exist. Of the total €880bn of residential assets, 50% are owner-occupied by private individuals – while of the rest, only a fraction of the commercially-held residential sector is ever actually on the market.

Extrapolating from German and French figures, whereby the commercial property sector is about a fifth of the total residential figure, this would give a figure for total Austrian property values at €1.1 trillion.  Of this amount, one could expect about €100bn of office or retail property to be of interest to institutional investors – whereas IVG reckons that actually only about €45-50bn is owned by institutionals, so there is much further potential for growth.

With an investment volume of €2.8bn, the high point of the Austrian market was reached in 2007, and subsequently fell to €1.3bn in 2009, after which nearly all foreign investors bar the Germans withdrew from the market. As elsewhere, office investors’ fixation is on core properties in prime business districts, which in Austria’s case means Vienna’s first district inside the Ringstrasse. The scarcity of such top assets has seed peak yields fall to 5%. The overall tenor of the market, according to IVG, is one where sentiment is healthier than actual turnover, but likely to continue to draw further investment.

One interesting story coming out of Austria these days is the success of a new convenience store concept spearheaded by Austrian investor Rudolf Haberleitner, an experienced turnaround specialist. His company TAP 09 has been at the forefront of buying up over 1,350 stores of German drugstore chain Schlecker in Austria and neighbouring European countries, bought from the bankruptcy administrators of Schlecker which filed for insolvency earlier this year, leaving thousands out of work and a landscape littered with shuttered-up Schlecker stores. Haberleitner has converted the stores to mom-and-pop convenience stores under the name ‘Dayli’, and last month attracted Austrian lottery and gaming operator Novomatic to take a 50% stake in the business.  Together they want to bring the concept to Germany.

The idea is to focus on towns with 5,000 or more inhabitants and offer everything that’s required for daily living – with a one-day delivery time on anything out of stock. The Austrians have already signed leases on nearly 500 Schlecker stores in southern Germany, Rhineland-Palatinate and Brandenburg. They’re targeting 600 by the end of next year, and up to 3,000 employees.