German real estate became a new "safe haven" in Europe

11/04/2017   Viewed: 913
According to the Wall Street Journal, in 2016, for the first time in almost a decade, Germany's leading commercial real estate transaction led Europe to the second position.

In the context of many instability in Europe after Britain left the EU and the risk of euro collapse, Germany is considered a new "safe haven" in the region.

Lars Huber, head of real estate firm Hines, said that if the Euro is retained, Germany will remain in its current position. If the euro area breaks up, its position is even greater.

According to data from research firm Real Capital Analytics (RCA), in 2016, for the first time since 2007, Germany led Europe in terms of real estate trade transactions, pushing Britain down to second place. .

In many German markets, the value of shopping centers, office buildings, warehouses has increased steadily.

In the past, when foreigners entered Europe, foreign investors often looked to Paris, London before coming to Germany, as these are the most robust real estate growth in the region.

But the situation has changed. Germany became more attractive to investors after Britain voted to leave the EU, and France was also unstable before the presidential election.
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German real estate market is becoming a new "paradise" of safety in Europe

German stability is a factor attracting investors in the context of commercial real estate market in many parts of the world are facing many challenges. The value of investments in commercial real estate in Europe and the United States declined mainly due to prices in major cities near or at record highs.

Although German trade has decreased, the pace of decline is still much lower than in other European countries.

RCA said in the second half of 2016, real estate transactions in Germany reached nearly 38.3 billion euros, down 4.8% over the same period last year. Meanwhile, the total value of transactions across Europe for the same period decreased to 13.1%.

Property prices in Germany tend to increase as investors accept lower rates of market capitalization when buying. The capitalization rate reflects the acceptable return on investment based on the market.

In the past three years, the market capitalization rate of German first class commercial real estate decreased by an average of 70 points, according to Savills.

According to the CBRE Real Estate Consultancy and Management Group, the office market in Berlin is particularly thriving due to its fast growing population and low supply. The market cap is at a record low of 3.25%.

Stuart Reid, a partner of UK-based Rockspring, a real estate investment and management company, says Berlin is a very attractive office space.

The huge demand from abroad makes German investors more competitive, especially for expensive real estate.

Jochen Schenk, board member of Real Estate Germany Real I.S. AG, said: "I hope investors will not accept lower than current market cap rates."


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