The considerable increase in transaction volume can be attributed to several large-volume single and portfolio sales, with the sale of the Kö-Bogen complex in Dusseldorf to Art-Invest for over €400 million; and the sale of the Aquis Plaza (formerly Kaiserplatzgalerie) in Aachen to KG Farmsen for €290 million deserving special mention as the largest single deals in the retail segment. Around 27 per cent, or €1.5 billion, of transaction volume was invested in retail portfolios from January through September 2013. “Of particular interest here are the sale of the Monsoon portfolio comprising of 10 Kaufland branches to financial investor Cerberus Capital Management for €224.4 million; and the sale of a portfolio of three shopping malls in Berlin, Hamburg and Ingolstadt to Redefine International for €189 million,” said Andreas Trumpp. “While the shopping malls reflect a core/core plus profile, the Monsoon portfolio can be classified as a value-add/opportunistic profile.” He adds: “The share of international investors at the end of Q3 was recorded at around 22 per cent with an investment volume of €1.2 billion.
Shopping malls attract the most capital
Approximately €2.2 billion of capital invested by the end of Q3 was put into shopping malls, giving these a transaction volume share of 39 per cent. Retail centers and specialist retail stores recorded an investment volume of €1.7 billion followed closely by properties located in downtown areas such as commercial buildings and department stores. While specialist retail stores mostly traded hands in the form of portfolios, shopping malls and retail centers as well as downtown properties were mostly sold as single sales. One third of the transaction volume, or almost €1.9 billion, was generated in the top six German real estate hubs of Berlin, Dusseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart as the result of a few high-priced transactions. In addition to the Kö-Bogen deal, these include the Hallen am Borsigturm sale in Berlin, the Zeil 94 property and the Zeilgalerie in Frankfurt as well as Alsterhaus and the Saturn department store in Hamburg.
Retail market dominated by conservative investors
Investors interested in buying were clearly led by open-ended real estate funds and special funds with a market share of 25 per cent and a transaction volume of almost €1.4 billion. These were followed at some distance by private investors and family offices with an investment volume of €747 million and; with similar results, by closed-ended real estate funds, pension funds and superannuation schemes with an investment volume of €593 million and €582 million, respectively. “We saw significant investment volumes in the retail segment by more opportunistic investors resulting from large package deals. These investors accounted for a market share of 9 per cent with an investment volume of more than €500 million,” said Andreas Trumpp.
Prime yield remains (mostly) low
“Similar to what we are experiencing on the overall commercial investment market, “secure” property types are in particularly high demand, like commercial buildings in prime locations and newly constructed shopping malls in established locations, continue to be very expensive in the retail segment as well,” said Andreas Trumpp. “Prime commercial buildings in downtown areas in the top locations and shopping malls are expected to generate average top yields of 4.25 per cent and 5.20 per cent, respectively,” he added. At the end of Q3, quality retail centers throughout Germany generated an average yield of 6.25 per cent. Individual specialist retail stores in established locations generated an average yield of 6.65 per cent.
Outlook: Excess demand for prime properties set to continue in 2014
In the shopping mall segment, we are seeing significant excess demand with yields of below 5 per cent no longer the exception. This applies especially to prime properties, i.e., new buildings in excellent locations with a balanced tenant mix and effective overall concept. Established existing properties with similar features are more reasonable but only slightly less coveted. “In view of the properties currently on the market, we’re expecting the lively activity to continue to the end of the year and beyond,” states Andreas Trumpp. This also applies to retail centers and specialist retail stores. Quality (new) properties of more than €15 million with an attractive tenant mix remain in high demand, making them rare and expensive. We are seeing pronounced selective buying behavior for objects of between €5-10 million; overall, the price trend is looking up. Many investors in this price category prefer buying portfolios over single properties. Smaller retail centers without grocery or discount stores as anchor stores, on the other hand, are almost impossible to sell.