Germany’s residential property market was dominated by several large portfolio deals last year, during which turnover exceeded the 2011 figure by 84%, according to a study by CBRE. Figures from the firm indicated that transaction volumes hit around €11.25bn.
And according to Savills, as in 2008, the market in 2012 was characterised by large transactions in which individual portfolios containing 10,000 units changed hands. Among these deals was the takeover of TLG Wohnen by TAG Immobilien, as well as divestments by DKB Immobilien, BauBeCon, Speymill Deutsche Immobilien and LBBW.
These large deals involved the transfer of 103,000 units in all, raising a total of about €5bn, CBRE says in its study, Market for Residential Portfolios 2012.
Savills Germany’s head of research, Matthias Pink, says: “Large-scale deals contributed significantly to the high transaction volume recorded in 2012. However, all size categories saw a year-on-year increase except the smallest deals, sized less than 800 units. As a result of this, the average deal size more than doubled compared with 2011.”
In all, about 197 residential portfolios comprising 13m m2 across 204,000 units changed hands in 2012, equating to a total transaction volume of €11.25bn.
Larger portfolios
Institutional investors dominated the purchase of larger portfolios, which helps explain 2012’s high turnover, says CBRE.
The firm’s head of residential investment in Germany, Konstantin Lüttger, says the German residential market is one of the most sought-after investment targets worldwide. This demand was reflected by the high transaction turnover of 2012. Lüttger says transaction volumes matched transaction volumes recorded in the 2004 to 2007 boom years.
However, he points out that the type of investors has changed as well as the investment strategy. Lüttger believes that acquisition decisions are still based on security-orientated investments focusing on core markets and core objects.
He also says that research has registered “increasing interest in management-intense products with a value-add potential in larger cities and their catchment area”.
Demand from investors remains unabated, especially in Berlin, says CBRE’s residential valuation team leader, Michael Schlatterer. Foreign investors are attracted because prices, acquisition yields and rents are still “moderate” compared with other German metropolises such as Munich or Hamburg.
“The potential for rent increases in the Berlin market is a reason for investment activity, turning Berlin into the most important and largest investment location for residential property in Germany,” he says.
Berlin-based residential property company GSW Immobilien acquired 4,400 residential units in Berlin for €200m in October and a further 2,600 apartments in the city for €147m in November 2012.
Berlin assets
The properties bought in October are located in the Berlin districts Spandau, Mitte, Reinickendorf, Charlottenburg-Wilmersdorf and Treptow-Köpenick.
The second portfolio contains properties in the Berlin districts of Neukölln, Mitte, Tempelhof-Schöneberg, Reinickendorf, and Steglitz-Zehlendorf as well as units outside Berlin.
The trend seems to be continuing this year with Union Investment Institutional Property purchasing three residential estates in Berlin for €87m from listed company TAG Immobilien.
Union Investment also announced that it had €120m of equity available for further investment. The company recently established the special fund Residential Value focusing on investments in residential property. The fund’s portfolio already includes the residential complex Ortlergärten in Berlin.
Austrian companies have started to build up investment divisions in German residential property, beginning last year with Vienna-based Immofinanz’s BUWOG acquiring Berlin residential company CMI.
At the beginning of this year, Vienna-based Conwert Immobilien followed the trend with buys in Hamburg and Berlin.
“Germany is our most important motor of growth, particularly in the area of property development,” says BUWOG managing director Alexander Hoff.
The majority of residential portfolio transactions, about 75%, were carried out by German investors, says Savills. However, Savills expects the share of foreign investors to increase, owing to rising levels of interest from private equity funds.
The most active group of investors in the residential portfolio market last year were listed property companies, which invested more than €4bn, followed by insurance and pension funds, which spent about €1.5bn in direct investments and €0.7bn through special funds, according to Savills, while private equity funds invested more than €1.2bn.
