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Germany retail property sector attracting most investment

Office real estate came in a distant second in terms of commercial transaction volume, at approximately €4.77 billion, the data report from Colliers International also shows.

‘In the first nine months of the year, shopping and specialized retail centres, department stores, commercial buildings in prime locations, specialized retail stores, and other similar properties accounted for nearly 47% of the total commercial transaction volume in Germany,’ said Andreas Trumpp, head of research at Colliers International in Germany.
The report shows that shopping centres are especially popular and risk orientated investors are particularly active in this sector. They made up nearly half, approximately €3.71 billion, of the overall transaction volume in the retail market segment by the end of the third quarter.

Department stores located in city centres and commercial buildings together accounted for about €2.02 billion in transaction volume.
‘About half of the capital invested in the first nine months of 2011 came from two groups of investors. Open ended and special real estate funds invested about €2.14 billion in retail properties, while risk oriented opportunity and private equity funds invested about €2.04 billion,’ said Trumpp.

There was also high demand for city centre properties and this has driven prices up. First class shopping centres currently bring in prime yields of between 5% and 6.5%, depending on the city and the location.
‘Investing in commercial buildings in city center locations is considerably more expensive. For ideal properties in these locations, we have even seen yields of 3.75%, as in the Munich market,’ said Falko Streber, partner and retail consultant at Colliers International in Stuttgart.

High shop rents in prime locations are one result of the extremely high sales potential offered by prime locations in Germany. Prime rents here range from €220 per square meter on Berlin’s Tauentzienstrasse and €270 per square meter in the Zeil shopping area, in Frankfurt, up to €320 per square meter on Königstrasse in Stuttgart and even higher, at €330 per square meter on Munich’s Kaufingerstrasse.

The report points out that the German retail market has garnered considerable international acclaim, since consumption barely slowed down even at the height of the crisis. Especially when compared internationally, the German retail sector is far ahead of those of other European countries. In light of the stable consumption behavior of German consumers, many international retailers are therefore turning an eye to Germany as a potential location.
‘But the alluring overall data for these locations can be deceptive, since they often say nothing about the cutthroat competition for certain sites and market share that exists on the ground,’ Streber explained.

In Germany, as in other countries, the retail sector has had to overcome crises, but many German retailers have established extremely competitive companies as a result. That is part of what makes German export goods coveted abroad and makes German audiences welcome users for other services, the report also says.

Colliers International in Germany maintains close ties with all the major chains and retailers on the German market, and with its in depth understanding of the various requirements involved, the firm supports both investors and project developers in designing and marketing retail development projects. ‘No other segment of the real estate sector offers comparable or better leverage in terms of yields. This makes it the key to many developments,’ Streber added.