While it’s almost commonplace now among analysts to view the German retail trade as the biggest category loser since the onset of the coronavirus pandemic, spurred on by the rise and rise of ecommerce, the actual investments figures present another very differentiated picture. In fact, according to property advisers JLL, the investment market for retail real estate has just seen its highest volume for the first half year since 2015.
The strong Q1 with a transaction volume of almost €4 billion was followed by a solid Q2 withjust over €2 billion, with the total of €6 billion exceeding the previous year's volume by 23%. The ten-year average was also exceeded by the same amount.
Only 2015 (€9.3 billion) and 2011 (€6.1 billion) exceeded the current value over the previous ten years. Sandra Ludwig, Head of Retail Investment at JLL Germany attributes the strong result of the first half of the year due to the major transactions of the Real property portfolio of X+Bricks and 3 Galeria Karstadt Kaufhof portfolios in Q1.
In the second quarter, 2 TLG portfolios were added, also snapped up by X+Bricks, along with a further almost 150 transactions. For the second half of the year, Ludwig also forecasts solid results compared to the average value of the past years.
Peak yields for high street products have remained largely unchanged in the Big 7 cities, with Munich continuing to lead the field at a 2.40% yield, or 42 times the annual rent. Next comes Berlin with 2.60%. Only in Cologne and Stuttgart was there a change compared to the previous quarter, where the yield rising by ten basis points in each city to 3.20%, with multipliers falling correspondingly.
Prices for shopping centers also declined, with yields rising by 10 basis points to 4.75%. While specialty shopping centers remained at 4.20%, individual specialty stores became more expensive - over the first to the second quarter, the prime yield fell by a further 20 basis points to 4.20%. According to Ludwig, the pressure on top yields for specialist store products reflected the further significant increase in demand during the pandemic.
Specialist store products (specialist stores, retail parks and supermarkets) contributed around 58% of the transaction volume. Department stores accounted for another 30%, with another 8% going to general shops and 5% for shopping centres.
The most popular categories were core-plus products which, at 48%, accounted for almost half the transaction volume. Core followed with 26%, just ahead of Value Add with 23%. Opportunistic products accounted for only 2% of the transaction volume in the first half of 2020.
The strongest players on both the buyer and seller side were asset/fund managers with 49% and 50% respectively. Other active buyers were private equity/hedge funds (18%) and corporates (10%). The latter were also highly visible on the seller side with 18%, where real estate companies also had a double-digit share of 12%. International investors reduced their portfolios by a net €325 million, contributing 49% of the volume as sellers but only 43% as buyers.
