Last year turnover in German retail real estate hit €10.1bn, giving it at 12% the third most valued investment category in Germany after office properties and residential. The volume fell for the second year in a row, but at a 4% fall its rate of decline has at least slowed noticeably. These figures were recently released by property adviser CBRE.
According to Jan Dirk Poppinga, co-head of retail investment at CBRE Deutschland, “Against a background of steady demand for German retail asset, the shrinking supply of physical assets in certain categories has led to companies buying up other companies to gain access to rising property values.” An example here would be Commerz Real’s acquisition of a 20% stake in ten Kaufhof department stores owned by Austrian developer Signa in Q4 2019.
The most popular and dynamic segment remains retail parks and specialist centres (“Fachmarktzentren”), with an almost unchanged share of 44% of the retail investment market (up 1% on 2018). CBRE’s Jan Schönherr, co-head with Poppinga of retail investment, said “Grocery-anchored assets in particular are benefiting from their resilience to e-commerce and are very much in demand. Thanks to the large number of these properties in Germany, there is still a steady stream of supply to meet the investment demand. With many of these having shown considerable capital appreciation, a sale now is often attractive.”
The share of prime retail assets on the high street has fallen from 37% to 28% of the investment market since 2018, but Poppinga said there was renewed interest across all risk categories in the sector, with a greater willingness to make adventurous changes. Shopping centres rose from 14% to 17% of volume, with a noticeable division between the limited supply of quality centres in the top cities, and the higher investment volume seen in the B-locations after a period in the doldrums.
Peak yields in top high street retail assets held steady in 2019, with a marginal rise of 0.08% to 3.11%, while shopping centres in A-locations rose by 0.2% to 4.0%, with shopping centres in secondary locations rising by 0.5% to 5.0%. Given the hefty demand for retail parks, peak yields drifted back 0.1% to 4.15%, bringing the yield difference between top shopping centres and the retail parks down to only 0.15%.
Schönherr said, “With yields for shopping centres having risen in 2019, international investors are back showing interest in assets with value-add potential. And with sellers showing a willingness to deal on price, some are seeing this a good opportunity to enter the market.”
“Again, across all asset categories, there’ll be plenty of capital for retail investment in 2020, and retail is still offering more attractive yields than other asset classes,” he said. The big issue remains just how exposed any particular retailer is to online competition, with weaker candidates subject to the most scrutiny and exhaustive due diligence. (ssk)
