“Munich remains the most targeted market in Germany for many national and an increasing amount of foreign investors,” says Tobias Seiler, Research Analyst at Colliers International in Munich. “Munich is also noticing the globalization of the real estate market, where more than 44% of the investment volume came from abroad in the first half of 2014,” continued Seiler. The purchase of “Karstadt am Bahnhofsplatz“ by an Irish investor and “Holiday Inn Munich City Centre“ within the framework of a portfolio deal by an Apollo Global Management fund were some of the largest deals by international investors.

Focus on Office Properties Continues, Hotels with Increasing Market Share

44% of funds representing € 912 million were invested in office real estate, which is usually the property class accounting for the largest market share. It is followed by hotel transactions with 16% or € 333 million, which can be considered as distinctive for the Munich market. In the past the transaction market for hotels in Munich was much less active. In the second quarter two large-volume hotel transactions took place, for properties located near the inner city. Already in the first quarter Eurostar Grand Central on Arnulfstrasse had a new owner. In third place were mix-used properties with a market share of 13% (€ 268 million).

Open Property Funds and Especially Special Funds are Most Active and Opportunistic Investors Getting More Involved

Open property funds and special funds, which have high capital inflows due to the current financial market situation, invested € 458 million and thus nearly € 160 million more than mid-year results of last year.
While opportunistic investors were hardly seen in the previous year, they became the second largest investor groups in the first half of year. Opportunity funds and private equity funds purchased commercially used buildings and sites for € 373 million and achieved the largest market share since the last boom in 2007.
Business was as usual for sellers on the market. Project developers and contractors let go of real estate worth € 385 million (19%), closely followed by open property funds and special funds with € 378 million (18%). In third place were opportunistic investors with a total volume of € 291 million (14%). “Both of the first quarters show that Munich’s market offers investors with a variation of risk profiles plenty of investment opportunities despite declining supply of new buildings due to the low number of building completions,“ says Seiler.

Forecast: Market to Remain Lively

“The very good mid-year results were a bit surprising and when looking at properties currently in a sales process the strong market activity will continue,“ resumes Béla Tarcsay, Managing Director at Colliers International in Munich. “We have observed that especially international investors and state funds and however German insurance companies and special funds continue to take a very close look at Munich’s market, which will lead to one or more transactions with mid and large sized volumes by the end of the year,” continued Tarcsay. “Thus we hold strong to our forecast that the investment volume will reach € 5 billion by the end of December.”

Fast Facts - Office Letting Q2 2014

Transaction volume: € 2.053 million (+38% compared to Q2 2013)
Largest buyer groups: open property funds / special funds: 22%
Largest seller groups: project developers / contractors: 18.8%
Most demanded property type: office with 44%
Office premium yield: 4.25%