German residential volume touching on pre-crisis highs

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Figures reaching us from BNP Paribas Real Estate confirm the ongoing strength of the market for German residential portfolio transactions, albeit somewhat lower than last year’s record turnover of €3.64bn in the first quarter. Not counting the huge LEG market flotation, which the brokers (justifiably) don’t consider a transaction for statistical purposes, transactions totalled €1.8bn in the first quarter of this year, which brings volumes back within sight of the boom pre-crash years of 2006 and 2007.

The BNPPRE team counted 59 sales that met the qualifying criteria, covering a total of 32,000 apartment units. The average size per deal is €31m. Heading the list in terms of size was Deutsche Wohnen AG’s acquisition of 5,300 apartments in Berlin and Corestate’s sale of 3,700 apartments in a portfolio located throughout North Rhine-Westphalia, Hesse and Berlin.

Despite the strong start, the BNPPRE team along with the other leading brokers are not expecting last year’s volume of €11.4bn to be reached. Andreas Volker, CEO of BNPPRE Consultancy, said to media recently that all portfolio sectors were likely to experience demand, not just the super-sized ones such as the 32,000-unit GBW portfolio which was bought by a Patrizia Immobilien-led consortium in April for €2.4bn.

Commenting on the quarter just passed, Volker said of the investor makeup: “The three most active investor groups were Special Funds with 37%, followed by equity and real estate funds with 24%, and listed property companies, which accounted for 18% of market activity. Pension funds and insurance companies, which accounted for a significant percentage of market activity in 2012, have been mostly inactive this year.”

So, where are all the buyers coming from? Looking at the figures for 2012, the majority of investor activity came from within Germany itself, with domestic purchasers accounting for 75% of all activity, and other Europeans making up 20.5% of the market. North American investors accounted for 4% of the market.

The first quarter of this year, by contrast, saw much higher involvement from overseas buyers, with 56% of buyers coming from abroad. Buyers from continental Europe accounted for 27% of the total, and with most likely to have been motivated by the ‘safe haven’ argument. North American investors made up 22% of the total.

Notable - and highlighting the presence of many opportunistic investors -is the fact that two of the eight transacted packages of over 1,000 units were ‘distressed’ portfolios, and these both went to overseas buyers.

Project developments have gained ground, making up 18% of transactions, up from 3% the previous year. 41% of portfolio deals exceeded €100m, down from 82% last year. That drop partly explains the drop in total transaction volume.