The Property Banks German Property News
German commercial property set for boom, open PR (press release), Germany - 23 Apr 2007The German economy is going from strength to strength according to figures released by five of the country's economic institutes. According to news agency Bloomberg, forecasts for economic growth have been raised by two-thirds, with analysts predicting the economy to rise by 2.4 per cent this year. In comparison, last year's projections for economic growth in 2007 were just 1.4 per cent.
Germany is the largest economy in Europe and the forecasted growth should mean increased affluence and the creation of more jobs. "German exports are surging, joblessness is falling and consumer price increases moderate," according to Business Week analysts. Another possible side effect is a higher demand for commercial property in key German cities.
The latest European property report issued by Scottish Widows Investment Partnership (SWIP) found that the German property market had experienced "significant growth" in 2006. This was attributed to a rising service sector, which is beginning to fill he gap left by the decline in the traditionally dominant marketing sector. According to SWIP, the rise of the service sector will fuel a demand for office property.
Frankfurt was found to have seen the largest returns for office property last year, which at 32 per cent have reached their highest levels in more than 15 years. The commercial property rental market in the city has also experienced "positive growth", the report found, attributed to "booming growth in the business and financial sectors, which now accounts for a third of employment in the city".
Indications for future growth in Frankfurt are good, according to SWIP, because there is a low vacancy rate for office property, especially in Grade A buildings. Service sector growth has apparently boosted commercial premises rentals by 14 per cent between 2005 and 2006. Another city that has been identified as being a positive prospect for the future is Hamburg.
SWIP expects the city "to lead Germany's office property market over the next five years". A "well positioned" service sector is singled out as being the most likely driver behind a boost in the commercial property rentals market and the organisation is prediction returns of around nine per cent in the city.
According to Robert Matthews, head of international property at SWIP, "we're seeing the start of a three to four year cycle starting now which will see the German market gain confidence". In his opinion, "Germany doesn't have a single dominant city" and has several areas that present a range of opportunities for buy-to-let investors. However, he added: "Our forecasts point towards steady growth in Hamburg over the next few years, where economic indicators and increased demand for office property bode well for future growth."
The German economy is going from strength to strength according to figures released by five of the country's economic institutes. According to news agency Bloomberg, forecasts for economic growth have been raised by two-thirds, with analysts predicting the economy to rise by 2.4 per cent this year. In comparison, last year's projections for economic growth in 2007 were just 1.4 per cent.
German commercial property 'set to provide
strong returns', London Stock Exchange, UK - 19 Apr 2007
The growth of the German property market will see investors claim
strong returns in the future, it has been claimed.
Scottish Widows Investment Partnership (SWIP) has predicted that
total returns will reach 9 per cent in the next few years.
Frankfurt in particular has seen a buoyant market increase in recent
times, with some office property returns hitting 32 per cent - an
18-year high, it added.
The body also cited Cologne as a potentially viable market for
investors, placing it alongside the markets in Frankfurt, Hamburg,
Berlin, Munich and Dusseldorf.
"In terms of property markets, Germany doesn’t have a single
dominant city. Instead, the federal structure provides a range of
centres each with their own opportunities for property investors,"
said Robert Matthews, head of international property at SWIP.
Yesterday, BuyAssociation revealed that investor looking to buy in
the US could see significant returns from New York and Florida
properties in the wake of the $2 pound.
DIX German Index, 01,May, 2007
The DIX German Property Index measures un-leveraged returns on direct investments held through the year. The total value of the properties covered by the Databank results at December 2006 was €53.8bn, representing 21% of the value of the holdings of the financial institutions and quoted property companies.
| German property performance - to December 2006 | ||||
|
All property
|
Retail
|
Office
|
Residential
|
|
| For calendar year 2006: | ||||
| Total return |
1.3
|
5.4
|
-0.9
|
6.5
|
| Capital growth |
-3.1
|
-0.3
|
-5.2
|
2.7
|
| Income return |
4.6
|
5.6
|
4.5
|
3.8
|
The German all property total return for 2006 was 1.3%. This return is actually the highest posted over the past three years and constitutes an increase of 80 basis points on 2005. Property under-performed the equity market for the fourth year running, which returned 22% in 2006 although property did out-perform the bond market, which returned 0.3%.
For the first year since the beginning of the index in 1996, the residential sector was the strongest sector with total returns of 6.5% an improvement of 510 basis points on 2005. Industrials have been relegated to second with a 5.5% total return following a six-year run at the top. Retails took third spot with a total return of 5.4%, the highest posted by the sector since 1999.
The weakest sector was office properties, which dominate the index, achieving total returns of -0.9%, an increase of 30 basis points on 2005.
Capital values continued to fall at the All Property level for the fifth consecutive year. In 2006 property values fell by 3.1%, whilst income return remained at 4.6%. The main driver behind the weak capital return was the rise in initial yields, which rose by 10 basis points to 6.1% in 2006. This growth was despite a fall in Euro-zone interest rates from 2% to 1.7% in 2006. Market rental value has remained negative over the past fourth years standing at -1.0% at the end of 2006.
Managing Director of IPD GmbH, Dr. Daniel Piazolo said, “After five consecutive years of declining total return in Germany, the year 2006 has brought the trend change. The residential sector performed best and had with 2.7% the highest capital growth of all sectors. At IPD we are very pleased to have five new non-German clients and data supplies mirroring the increasing activity of multinational companies within Germany.”
German property: potentially great for
investors?, City Wire.co.uk, UK - 18 Apr 2007
Germany is being hyped headily as The Place To Invest this year.
This is not only because the tide might be turning after several
lousy years, but also because its situation compares so starkly with
the hugely overblown markets in the UK - and that goes for
residential as well as commercial.
Figures today from IPD spell out both those factors:
'The German All Property total return for 2006 was 1.3%. This return
is actually the highest posted over the past three years and
constitutes an increase of 80 basis points on 2005. Property
under-performed the equity market for the fourth year running, which
returned 22% in 2006 although property did out-perform the bond
market, which returned 0.3%.'
In fact capital values are still going down - by 3.1% last year -
and it was only a 4.6% income return that saved the bacon for
investors.
Initial yields there are 6,1%! Investors in the UK haven't seen a 6
on the business side of the decimal place for some years.
IPD's German boss Daniel Piazolo is optimistic.
'After five consecutive years of declining total return in Germany,
the year 2006 has brought the trend change. The residential sector
performed best and had with 2.7% the highest capital growth of all.'
Developer Assetz reckons Berlin could be the next buy-to-let
hotspot, and especially the former East side of the city. It points
to a recent article on the subject in the Independent.
'Liam Bailey, the head of research at Knight Frank, says: "Too many
people look to invest in the top growth location like Latvia,
assuming that high growth will continue. It might be a more
interesting and perhaps rewarding strategy to look at the bottom of
the table and think which of these countries will see the next
upturn.
"We think investors could do well to look behind the headline figure
and look more closely at some of the German sub-markets."
And there seems to be plenty of potential there:
'The latest trend to hit Berlin is for loft apartments, says Bruno
Nonaca of IPP Investment. "A lot of the old fabric is available for
refurbishment and we are doing a lot of loft apartments," he
reveals. "A former commercial building can yield 7 per cent after
refurbishment as lofts."
'Nonaca is currently selling Steinlein Lofts, a conversion of a
19th-century leather factory in the Prenzlauer Berg area of East
Berlin (except that nobody calls it East any more).
'The large industrial-chic apartments cost between €86,000 [£43,000]
and €379,000 [£190,000], a fraction of the price of similar lofts in
Hoxton or Clerkenwell. Nonaca expects rental yields to be between
5.5 and 6.7 per cent.'
German Property set for Significant Boost, 9th March 2007, Assetz
According to Julian Lu, a regional director at real estate brokers Imoinvest, the property market in that country is set to rise "significantly" in the near future. He says a key indicator of this is the amount of private equity funds now investing in German property, combined with a move on the part of German banks towards offering investor-friendly mortgages.
And he is not alone. Alex Ross, of Premier Asset Management's Pan-European Property Share fund, sees Germany as a key part of his investment portfolio with the potential for good returns. "Most of my focus is now on continental European property where the medium term outlook is very attractive," he confirms, adding: "This is because of the positive yield gap. It is positive in continental Europe against a negative in the UK".
He explains that, as he sees it, Germany is in the middle of a cycle at present, with office rent across the country at a five-year low. He points to the fact that Frankfurt, which has seen a 35 per cent drop in rental yields in the past three years, is once again seeing prices rise. According to Mr Ross, the fourth quarter of last year saw clear rental growth, which he expects to see continue - a prediction that is bound to interest those UK investors that are looking for promising new markets.
Oliver Jackson of World Capital Partners concurs. "People are looking abroad to invest in property, as the market out there is rising faster than the UK market has done over the past 10 years," he says. One investor who has been drawn to the German market is civil engineer Alan Jackson, who says that he was attracted by the high rental yields possible. Mr Jackson invested in a two bedroom apartment in Uthmannstrasse, an area that is expected to produce rental prices of around ten per cent. He says that after studying various locations throughout the world, "we decided upon Germany and in particularly Berlin as this seemed to have all the right ingredients to become one of the most successful European markets ever".
Standard Life makes 1st acquisitions in German Property Market, 23rd February 2007, Easier Finance
Standard
Life Investments, one of the largest property fund managers
in Europe, has announced that it has made its first
acquisitions in the German property market as part of a €91m
strengthening of its European Property Growth Fund (EPGF).
EPGF has purchased a single let logistics warehouse in
Neuss, Germany. The €17m acquisition consists of 22,000 sq.m
of warehousing space and represents an attractive yield
corresponding to the high quality of the building and the
tenant. It is let to Asics Europe BV, the sportswear
manufacturer, and is situated in an established distribution
location 1km east of the A57 motorway.
The Fund’s second German acquisition is an industrial estate
in Rattingen, located to the north of Dusseldorf close to
Dusseldorf airport. Purchased for €15m, the estate is
multi-let with some vacancy covered by a rental guarantee.
Further acquisitions for EPGF continued in Central Europe
with the €13.2m purchase of a single let retail warehouse in
Brno, the Czech Republic’s second largest city 200km south
east of Prague. Let to the furniture retailer Sconto Nabytek
it totals 13,200 sq.m. and represents an initial yield of
6.91%. In addition, EPGF committed €38m to Hungary via a
portfolio of three properties – two modern fully let
logistics warehouses at Gyor and Jaszbereny (let to a
Hungarian subsidiary of Renault and Hilite International
respectively) and the forward purchase of a pre-let
distribution facility in Budapest. Other activity included a
14,195 sq.m extension to a logistics warehouse near
Willebroek, Belgium.
Will Fulton, Manager of the European Property Growth Fund,
Standard Life Investments, said: “With another €91m invested
in bricks and mortar, the portfolio has remained focused on
acquiring high quality commercial properties with excellent
prospects for growth. In line with this theme of growth we
have made our first investment into Germany. Having
purposefully stayed out of the German market for 10 years,
our analysis of pricing against improved economic confidence
highlights an increasing demand for industrial and logistics
service providers."
"We have also continued our investment in Central Europe
with the purchase of our first retail property in Brno,
Czech Republic and strategic logistic assets in Hungary.
Along with a healthy yield margin over Western Europe, the
Czech Republic benefits from high consumption growth which
in turn is an excellent driver for rental growth.”
“Taken together, these acquisitions will serve to sustain
the strong performance that the European Property Growth
fund has generated since its launch. The outlook for the
commercial property market in Europe remains attractive and
I am looking forward to announcing further acquisitions we
are working on in the near future.”
For the 12 months to September 2006, the fund returned 25.8%
(net of all fees).
German property kick starts as economy
hots up, 22nd February 2007, Press World
Fifteen years of stagnation in the German property market
appear to be coming to an end as foreign investors are
finally starting to buy up property in Berlin.
Over the last decade, Europe's largest economy has suffered
from the twin devils of high unemployment and high inflation
but a series of free market reforms that have taken places
over the last few years are finally beginning to bear fruit.
Buoyed by a successful World Cup, the economy expanded by
2.5 per cent last year, the fastest since 2000, and
forecasters predict that this rate will be sustained this
year.
A new report released by the European commission today says
the recent growth is indeed an example of the drag from the
1989 reunification easing but that there are still a number
of factors, including low labour force participation and tax
obstacles to investment, that are preventing the economy
from reaching its full potential.
Therefore, if Angela Merkel's centre right government
proceeds with its reforms, the country is likely to see even
stronger economic growth.
Some of this growth is beginning to manifest itself in the
property market, which grew by a tentative 0.2 per cent last
year, after making losses in 2005.
Berlin in particular has seen a number of multi-billion
pound investments in property from the UK and Europe.
Investment bank Terra Firma is currently buying up large
apartment blocks and leading multinational corporations Son
y and DaimlerChrysler have recently made large investments
in the city's commercial property market.
Stuart Law, chief executive of Assetz, said: "Germany is a
new market for most overseas investors and it will take time
to develop, so I would advise taking a ten year view rather
than expecting instant returns.
"However, the growth triggers investors have been waiting
for are starting to occur, with prices in some residential
areas such as Charlottenburg, Wilmersdorf and Shoneberg
seeing small rises after years of declining or static
prices."
Berlin is unique among major European cities as only 14 per
cent of residents own their own homes. This represents a
huge untapped domestic rental market for the overseas
investor, but one that is likely to diminish as an increase
in activity is likely to drive a growing preference for home
ownership.
Mr Law added: "With economic conditions remaining favourable,
it is inevitable that the Berlin market will catch up, as
the UK-led phenomenon of buying your own home continues to
spread rapidly across Europe."
German Property set for Boom, 20th February 2007, Real Estate TV
Property in
the German capital, Berlin, is set to experience a
significant growth in prices over the coming years, sparked
by a huge influx of investment into the city.
Property website Assetz has published figures which show
that Berlin's property prices increased by 0.2 per cent in
2006 - after several years when losses in the property
market were recorded.
Similarly, the German economy expanded rapidly over the last
year. In 2006, the country's economy increased by 2.5 per
cent, its fastest growth since 2000.
Because of these figures, as well as the fact that German
unemployment is currently at its lowest level for four
years, many experts are advising people in the UK to think
about investing in the German property market over the UK's,
which some people think could be over-saturated.
Alex Ross of Premier Asset Management told ifaonline that a
quarter of his current portfolio is invested in the German
market.
He explained to the website that this was because "Germany
is now where the UK was around three years ago".
Prosper from German Property, Urge Analysts, 20th February 2007, Ifaonline
PROPERTY
investors fed up with an “overstretched” UK market could do
worse than look to Germany, say analysts.
Investing in UK bricks and mortar has reaped rewards over
the last decade but some observers now suggest the market is
becoming saturated.
Instead, they are touting German property as the place to
invest, citing economic growth last year and the lowest
rates of unemployment in four years as proof of a blossoming
nation.
Stuart Law, chief executive of Assetz, says the growth
potential in German property is finally starting to bear
fruit.
“Germany is a new market for most overseas investors and it
will take time to develop, so I would advise taking a ten
year view rather than expecting instant returns,” he says.
“However, the growth triggers investors have been waiting
for are starting to occur, with prices in some residential
areas seeing small rises after years of declining or static
prices.”
Oliver Jackson, commercial director at World Capital
Partners, adds: “The UK property market is dangerously
overstretched, wage inflation is significantly lower than
house price inflation, and interest rates are creeping up.
“So people are looking abroad to invest in property, as the
market out there is rising faster than the UK market has
done over the past 10 years.”
Alex Ross, manager of Premier Asset Management's
Pan-European Property Share fund, says his investments in
Germany – around a quarter of his portfolio - are proving
profitable.
“Most of my focus is now on continental European property
where the medium term outlook is very attractive,” he says.
“This is because of the positive yield gap. It is positive
in continental Europe against a negative in the UK.
“The reason a quarter of my portfolio is in Germany is
because the country is in the middle of its cyclical curve
at the moment.
“For instance, office rent in Germany is at a five-year low
and, in Frankfurt, rent has fallen by around 35pc in the
last three years.
“But this is now tailing off and we’re starting to see some
rental growth kicking through. In fact, in the fourth
quartile of last year, rent in Frankfurt was on the
increase.
“Germany is now where the UK was around three years ago.”