15 November 2011, Munich – By the end of the third quarter of 2011, investors in Germany invested a total of € 7.87 billion in retail real estate, putting this type of property far ahead of all other use categories for this year. Office real estate came in a distant second in terms of commercial transaction volume, at approximately € 4.77 billion. “In the first nine months of the year, shopping and specialized retail centers, 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,” says Andreas Trumpp, Head of Research at Colliers International in Germany. Among the factors responsible for this are a number of large-volume individual and package sales: “During the first quarter, financial investor Cerberus invested about € 700 million in over 40 Metro Cash & Carry stores. Then, too, the Canada Pension Plan Investment Board spent about € 650 million on a 50% share of the CentrO property, in Oberhausen,” Trumpp explains. Other large-volume transactions concluded during this period involved multiple sites belonging to the Karstadt department store chain in Hamburg and Munich, the Hamburger Meile shopping center in Hamburg, and the Skyline Plaza project in Frankfurt. Negotiations regarding the sale of Munich’s PEP shopping center for over € 400 million are currently in the final stage.
Shopping centers especially popular – risk-oriented investors highly active
Shopping centers made up nearly half (approximately € 3.71 billion) of the overall transaction volume in the retail market segment by the end of Q3. Department stores located in city centers 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,” Trumpp reports. “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.”
High demand for city center properties and locations drives prices up
First-class shopping centers currently bring in prime yields of between 5.00% and 6.50%, depending on the city and the location. Falko Streber, Partner and Retail Consultant at Colliers International in Stuttgart, says: “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.”
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/m² on Berlin’s Tauentzienstrasse and € 270/m² in the Zeil shopping area, in Frankfurt, up to € 320/m² on Königstrasse in Stuttgart and even higher, at € 330/m² on Munich’s Kaufingerstrasse,” Streber reports.
Little sign of crisis in German retail sector
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 says.
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.
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 says in summary.