"A strong first quarter, however, was followed by a considerably quieter second quarter," says Andreas Trumpp, Head of Research at Colliers International in Germany. He adds, "The sale of the Queens Moat Portfolio to an investor consortium headed by the Fattal Group in the first quarter has by far been the largest transaction this year." This deal propelled the share of international investors in total transaction volume at mid-year to 48% (€356 million), putting it significantly above the share recorded for the entire German commercial investment market (27%). The same situation applies to the share in portfolio sales. Around €328 million, or 47%, was invested in three portfolios during the first six months of the year.

Top locations as well as deluxe and first-class hotels are top of the list

The investment share we saw in the first quarter in the top locations of Berlin, Dusseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart remained steady throughout the first half of 2013. Two thirds, or €461 million, were invested in these cities. Another difference became apparent in average investment volumes. While more than €19 million were invested per hotel in these top locations, only slightly under €8 million of transaction volume was recorded outside these locations. Investors primarily purchased portfolio properties in the 3-4 star segment, in which more than 65%, or €456 million, of total transaction volume was invested. This was primarily due to the sale of the Queens Moat Portfolio. Investors put around €148 million (21% of market share) into 5-star luxury hotels and around €92 million (13%) into low-budget and economy-class hotels.

Owner-occupiers and low-risk buyers dominate the scene

Between January and June, most capital by far came from corporates and owner-occupiers, who invested some €369 million (53% of market share) in German hotel real estate. Private investors and family offices came in second at €98 million. Worth particular mention are the two hotels sold in Hamburg, the InterContinental, which went to Klaus-Michael Kühne for approx. €20 million, as well as the Vier Jahreszeiten, which was purchased by a Dohle Group private asset management company for approx. €40 million. Pension funds also recorded a two-digit market share of approx. 13% at around €94 million. High-risk investors have not yet made their presence felt as buyers. They were very active as sellers, on the other hand, selling hotel real estate totaling at around €328 million. Project developers and insurance companies at €115 million and €110 million, respectively, were also quite active on the sellers’ market for German hotels.

Outlook: Positive market trend to continue in second half of year

Investment demand continues to exceed the number of available properties. Currently, there is a lack of suitable products for capital investors. The buildings for sale at the moment often miss the mark in terms of size and contract specifications. Due to the construction of additional hotels, portfolio properties currently in the pipeline and a few larger individual deals, we continue to expect a positive business trend in 2013 accompanied by a transaction volume similar to that of the previous year. We also expect a boost in demand as the result of increasing interest on the part of institutional investors. This could have an impact on the price level. If the interest of these investors continues to grow, we can look forward to an ongoing positive trend on the German hotel market.


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