OFF THE BEATEN TRACK
Those interested in advising clients about entering the German commercial real estate space may still face the same issues in 2015 as in previous years.
The initial yields for investment properties across all asset
classes are expected to decline, rents for occupiers will continue
to rise, and vacancy levels, especially in light industrial and
logistic properties, may reach an all-time low.
The European Central Bank (ECB), led by the Italian Mario
Draghi, a former Goldman Sachs Investment Banker, is
continuing its expansionary monetary policy this year, despite
warnings that this may undermine the Pan European efforts to
consolidate public finances and improve the competitiveness
of the Pan European’s, somewhat sluggish economy. The ECB
has initiated a major program for the purchase of securities,
mainly including government bonds. This program has
triggered a further drop in interest rates of government bonds.
It has overcome strong opposition, as each European National
Central Bank will be largely responsible for buying its own
country’s bonds—and for bearing any losses.
Nonetheless, as Europe’s most resilient and biggest economy,
Germany is profiting from these recent developments as
capital inflow and investment will further increase. Even more
money will be reallocated into real estate in all asset classes
in 2015. The non-core segment, which has not been in the
focus of the non-German investor, will shift even more into
focus than in previous years, putting more strain on investment
yields and shorten, or even dry up, supply for products such
as logistic properties or offices. Therefore, I would advise my
fellow SIORs to encourage their clients to look off the beaten
track of the seven major business centers in the country:
Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich,
By Thorsten Wolf, SIOR