Why Germany is on real estate investors' radar right now
Guest blog from Charles Kingston, Publisher & CEO at REFIRE
The recent EXPO REAL, the annual commercial property trade fair held in Munich earlier this month, again lived up to its reputation as one of the two key events in the European commercial property calendar, along with its early-March counterpart, the MIPIM in Cannes.
With 38,000 visitors, the EXPO REAL was well attended with delegates, speakers and exhibitors all discussing the real estate investment markets in Europe and further afield. But, in my mind, there were some small but important differences between this event and other recent commercial property gatherings.
The first difference was that this was the first property conference that I have been to in a long time where there was a perceivable buzz about market activity across the board, and not just surrounding the mega-deals worth billions of euros, dollars or pounds. For a change, it wasn't just the headline deals that were being talked about.
The second difference that I noticed was the attention that the German market itself was getting from the international visitors.
Now this might seem a silly thing to say, after all - EXPO Real is a German event and the vast majority of the 38,000 attendees were German. But let me explain what I mean by this statement - in recent years the focus of the international investment market has been firmly on London and the UK, but this year, with many investors finding it hard to buy value in London there seemed to be an increasing interest in German real estate, with many believing that Germany can provide better returns. I have sometimes felt that, at past conferences and exhibitions the interest from some international investors in Germany has been almost academic. In Munich this month - it certainly felt different!
Market activity seems to support this swell of interest in German real estate.
According to recent research by Savills, total turnover in the German commercial real estate market could reach €30 billion in 2013, outstripping the 2012 volume by around €5 billion. Savills' forecast is based on its belief that the volume of deals in the second half of the year is set to rise, based on the number of major transactions in the pipeline and a further rise in the real estate transfer tax - set to take effect in Berlin in 2014. Savills estimates that around €12.5bn was invested in German real estate in the first half of 2013 - a 36% year-on-year rise, and representing the strongest half year since H12008.
There are a number of factors that are coming into play here. The most obvious is the political stability of Germany. On the face of it the recent elections seem to indicate that this will continue. However, with Chancellor Merkel yet to agree the structure of her new coalition, there are some out there who are voicing concerns.
The strong German economy is another factor in the increasing attraction of the German market - but some international investors have, in the past, failed to appreciate that the economy, along with the country, is divided along federal, regional and geographical lines. It sounds simple but is often more complex than imagined for both the experienced and first time investor, particularly when you start to get under the skin of the different sectors and sub-markets.
The reality is that the German market isn't going away, and is increasingly featuring on investors' radar when planning their asset allocation. Following on from EXPO Real, we're expecting several lively sessions at the REFIRE 2013 conference in London next month, when for the first time ever over a full-day event, investors from the UK and service providers from Germany come together to explore the changing face of the German real estate investment market.