Market in Minutes - Investmentmarkt Deutschland - June 2019


Market in Minutes Investment Market Germany - June 2019

Portfolio deals on the decline

The downtrend in the transaction volume for commercial and residential property gained momentum in May. Properties changed hands for a total of approximately €3.0bn last month (Table 1). Such a low transaction volume was last witnessed in August 2014. The rolling twelve-month volume stood at approximately €71.8bn, declining by 3.5% compared with the previous month (Graph 1).

Transaction volume Germany

Source: Savills / *only residential transactions with at least 50 units

Less than 35% of the transaction volume over the last twelve months was attributable to portfolio transactions. The last time portfolios accounted for such a low proportion of investment volume was July 2011. While around 27% of the twelve-month volume in the commercial property market was attributable to portfolios, the corresponding figure in the residential property market (transactions for at least 50 apartments only) stood at around 68%. By way of comparison, portfolios accounted for around 90% of the residential investment market until 2015. The rolling twelve-month volume for commercial portfolios declined by around 8% year on year, while residential portfolios registered a decrease of 32%.

In terms of the availability of product, the commercial and residential property markets have recently shown diverging trends. While around 11% more commercial portfolios changed hands over the last twelve months compared with a year earlier, the number of apartment portfolios fell by a third. However, the commercial portfolios transacted were significantly smaller than a year ago, with the average transaction size falling by around 17% to approximately €95m. During the same period, the average size of apartment portfolios rose marginally (+2%) to approximately €78m.

In the residential property market, the declining significance of portfolios is primarily explained by the fact that the number of large company acquisitions by property companies has decreased over the last four years. In recent years, the market has been particularly dominated by long-term purchasers with a buy-and-hold strategy, causing a significant decrease in the availability of large portfolios.

In the commercial investment market, on the other hand, the composition of portfolios has changed significantly. Industrial and logistics portfolios accounted for approximately 21.2% of the transaction volume over the last twelve months, surpassing office portfolios, which were responsible for 21.1% of investment. The five-year averages for these sectors stood at 17.6% and 25.1% respectively. Retail portfolios continued to account for the largest proportion of the commercial portfolio market with around one third of the investment volume. Portfolios with strong food anchors were an increasing target for investors. The market for care home properties, which is undergoing structural growth, also witnessed a significant increase in investment activity. During the remainder of the year, it is likely that the logistics, care home and food retail sectors will further increase their respective shares of overall investment volume.