As usual, office properties were the most popular investment class with investors devoting €3.15 billion, or 61 percent of total transaction volume, to this property type. However, this share was down from previous years since hotel real estate, a property type that has been enjoying popularity in cities other than Munich as well, attracted significant capital. Ten hotel deals generated around €550 million, or 11 percent of total transaction volume. The boom we have been experiencing in the accommodation sector with the number of overnight stays growing is now starting to make itself felt on the Munich investment market. Mixed-use properties trailed slightly in third place, also accounting for 11 percent of total transaction volume. The year’s largest transaction was Deka Immobilien’s purchase of the Theresie property for €257 million. The Allianz Group also invested over €200 million when it bought back its own headquarters in Unterföhring.
Activity by foreign investors showed that awareness of Munich’s economic prosperity continued to grow beyond country borders in 2014 as well. Around 29 percent of total transaction volume was generated by international players. “In the coming year we expect to see even more growth in the number of transactions involving international investors. In addition to the fact that conditions remain favorable for Germany as an investment destination in general and Munich in particular, the current depreciation of the euro could make the location even more attractive to non-European investors,” explains Béla Tarcsay, Managing Director at Colliers International Munich. “Asian investors in particular have been actively looking into the market in past quarters and some have already finalized their firsttransactions. These investors will become even more active in 2015,” Béla Tarcsay continues.
Just as we saw in the previous year, open-ended real estate funds/special funds were the most active buyer group, investing €1.32 billion. They were followed by insurance companies, which acquired €0.67 billion worth of property as well as by private investors/family offices, which purchased property for €0.65 billion. Private investors/family offices pushed property developers aside to take first place among the seller groups, selling property worth a total of €0.94 billion. The latter came in a close second with sales totaling at €0.91 billion. Opportunity funds/private equity funds were right behind, selling property for €0.90 billion. This group took advantage of current market conditions to dispose of some older, upvalued investments.
The strong interest in Munich real estate caused property values to rise once again. Prime yields for premium, fully let properties in top locations fell again in the past twelve months, finishing up the year at 4.00 percent. Investors played it safe, particularly in terms of high-volume investments, and tended to focus on core properties. An increasing number of opportunistic and value-add investments, however, were made in the mid-volume range. When it came to existing properties with vacancy or located outside leasing market hot spots, investors assumed that the Munich market was stable enough and that these buildings would meet with sufficient demand among tenants.
“2014 was a good year on the Munich market and fully met our expectations. Munich showed that it really is the “safe harbor” that investors have been talking about over the past several years. And conditions for real estate investment remain attractive. In view of the lack of high-yield investment alternatives and the market’s ongoing high liquidity, Munich real estate will remain attractive in 2015 as well,” Béla Tarcsay concludes. “We expect transaction volume in 2015 to match the numbers we saw in 2014. The limiting factor here, as in the past, will be supply.”