A recent survey by Berlin-based rating agency Scope on investing intentions of Germany’s real estate fund managers shows a marked preference for more investment in residential property assets.
Last year Germany’s open-ended funds invested €3.6bn in German properties – amounting to 45% of their total investment of €8bn. The prior year the amount invested in Germany was only 39% of their total volume of a comparable €7.8bn.
This concentration on Germany has come at the expense of investment in the USA, which fell from 12.6% of German fund investment in 2018 to only 3%. In 2016 the comparable figure stood at a whopping third of all investment.
Scope puts this decline down to the high cost of hedging the currency, with the marked difference in interest rates in the respective euro and dollar zones playing a big role, and have made US investments much less attractive for investors from the euro zone.
In terms of preferred use, overall office properties continue to be the most popular, with a total of 60.9% of all 2019 investments made in the office sector, compared to 68.7% the previous year. This fall is due to the rise in residential real estate, which although previously making up just 2.3% of the funds’ portfolios, this jumped hugely last year to 17%, largely because of heavy investment in the student housing segment.
It’s not just the recently launched funds that are focusing on the residential sector, such as the new fund "BNP Paribas MacStone", but also the established heavyweights, such as Commerz Real's Hausinvest, who are increasingly upping their allocation to the asset category.
By contrast, interest in retail real estate has declined - only 10.4% of the funds’ portfolios is still in this segment, compared to 17.7% in 2018. The share of hotels in the total investment volume has likewise dropped, from 8.5% to 4.6%.
The Scope analysts are expecting the trend to continue through this year, with the corona crisis is also likely to lead to a significant decline in investments in hotels and retail properties, especially shopping centres. The German funds are likely, like investors elsewhere, to focus their attention on logistics and residential real estate.
