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German investment market back to strength at mid-year 2021

  • Q2 rally puts H1 transaction volume almost level again with the boom years at €23.1bn.
  • Foreign capital back in the mix
  • Logistics consolidates position as second-strongest asset class
  • More high-volume deals in the pipeline for H2
  • Investors pour roughly €4.4bn into German logistics market in H1 2021, boosting results 44% yoy

Frankfurt/Main, Germany, 23  July 2021 – According to leading diversified professional services and investment management company Colliers (NASDAQ and TSX: CIGI) the German commercial investment market closed out H1 with €23.1bn in transaction volume. Following a calm start to the year, an extremely lively Q2 helped the market expand, posting a transaction volume of EUR €14.3bn, which even exceeded the Q2 results from boom years 2017 to 2019 of roughly €13.5bn. The industrial and logistics sector posted roughly €4.4bn in total transaction volume in the first six months of the year, making this the second-highest H1 result ever recorded for this asset class.

Business activity almost back to “normal”

Matthias Leube, CEO of Colliers in Germany highlighted the positive general sentiment among investors, saying: “The increasing number of pitch requests is an unmistakable sign that activity is picking up. This trend is also reflected in the real estate climate survey index. The index has risen across all asset types since April, picking up further momentum in June. As we overcome the general economic challenges over the course of the year, we will also see a boost in activity on the leasing markets”.

 

Major deals return despite Covid-19 restrictions

A key driver behind the rally in Q2 was the return of megadeals – those with a deal value of €500m or more. Boosted by a number of landmark deals, single-asset transactions dominated the market, with €17.8bn in transaction volume and a market share of roughly 77%. Portfolios offer investors the opportunity to list larger ticket volumes outside the country’s top investment hubs, which are currently characterized by a lack of product and price hikes. Asset types with wide geographic distribution, such as logistics assets and retail warehouses, are particularly attractive alternatives in terms of their risk-return profiles. German investors poured €15.8bn, or around 69% of total investment capital, into German assets by mid-year. Foreign investors accounted for roughly €7.3bn, €2.3bn of which originated in the UK (10% market share), €1.3 bn in the US (6%) and €970m in Austria (4%).

 

Office assets increase market share

Among the asset classes we saw a shift in favour of offices at the mid-year point, with office assets claiming a market share of 48%. Industrial and logistics assets, which have benefited from the pandemic, followed in the ranks with 19%, putting retail assets again in third place at 12%. Investors continue to prefer office properties in Germany’s top 7 cities with Berlin, Munich and Frankfurt claiming the top positions.

According to Christian Kadel, “The investment market made an impressive comeback in Q2. Negotiations on a number of major deals are fairly advanced, and we are likely to see those deals signed sometime in H2. We expect pent-up demand to hit the market in 2021 and continue into next year, particularly coming from foreign investors. A 2021 annual transaction volume of over €55bn appears realistic.”

 

Industrial and Logistics market with an impressive performance

Nicolas Roy MRICS, Head of Industrial & Logistics Germany at Colliers, adds: “The asset class has attracted attention and delivered impressive performance over the past 12 months, particularly thanks to its minimal volatility and the e-commerce boom, which points to increasing demand for logistics space in the coming years. There is plenty of liquidity looking for a home at the moment. The tense situation in term of supply remains unchanged and is being particularly impacted by a scarcity of core and core+ products.

 

Foreign investors gain ground in Industrial and Logistics market

Foreign investors managed to increase their market share in H1 from 40% to 47%. German investors upped their activity in contrast, pouring roughly €2.3bn into German industrial and logistics assets.

Investors from the UK targeted German industrial and logistics assets worth over €839m, claiming a 19% market share. Canadian investors trailed at some distance with €460m, or an 11% market share. Although Asian investors remain underrepresented, they should be able to increase their activity in the second half of the year as travel restrictions start to lift worldwide.

 

Nicolas Roy predicts: “The marketing processes currently ongoing indicate an attractive pipeline in H2, which could boost transaction volume over the next few months. This in combination with the fact that the economy continues to stabilize following the pandemic year of 2020, a rapidly growing e-commerce sector and ongoing pressure to invest, points to above-average market performance leading up to the end-of-year result. With all this in place, we can realistically expect annual transaction volume to come in at between €7bn and €8bn.” 

Related Experts

Christian Kadel

Head of Capital Markets | Germany

Frankfurt

I have been active in the real estate sector for about 20 years. Previously, Managing Director at Eastdil Securd I was repsonsible for growing the company’s business throughout Germany. Prior to that I worked at JLL, where most recently I was Regional Director and Head of their Frankfurt Office Investment team, responsible for large volume transactions such as Commerzbank Towers (EUR 700mn) to Samsung, Messeturm (c.300mn) to Blackstone and Skyper to Allianz (c. EUR 300mn). Beside portfolio and single asset investment sales I have experience in corporate finance, letting/tenant representation and valuations. 

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Susanne Kiese

Head of Market Intelligence & Foresight | Düsseldorf

Duesseldorf

Susanne joined Colliers International Holding GmbH in February 2016 as Head of Research Germany. Before, she worked as a Senior Research Analyst for Hypothekenbank Frankfurt / Eurohypo, a specialist bank for real estate and public finance for almost 12 years. Susanne was also Research Analyst with Deutsche Gesellschaft für Offene Immobilienfonds (DEGI) GmbH, the property related investment company of Allianz Dresdner Property Group (now part of Aberdeen). 

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