Mixed-use? Yes, but new build please.
Text: Matti Schenk
The German real estate investment market is stabilising at record high levels. The transaction volume in the commercial and residential property investment market totalled approximately €6.2bn in October (see Table below). The rolling twelve-month volume at the end of October totalled approximately €81.0bn, which is in line with both the previous month and the level of investment a year ago.
The record high is being sustained by a booming investment market for office property (see Graph below). The rolling twelve-month volume for office property rose by around a quarter year on year. In contrast, the transaction volumes for retail property (-21%), industrial and logistics property (-11%) and multi-family properties (-5%) all declined.
Transaction volumes also fell outside of the established sectors. Alternative property types changed hands for approximately €5.4bn over the last twelve months, representing a decrease of 17%. While the niche segments of student / micro-apartments and care properties witnessed significant declines of 56% and 53% respectively, the transaction volume for hotels increased by 12%. In the latest figures, alternative property types accounted for around 10% of overall investment, which is in line with the five-year average. Hence, there is no evidence of properties outside of the traditional uses gaining market share overall.
Mixed-use property was among the few property types to register a higher transaction volume over the last twelve months. Overall, mixed-use properties changed hands for approximately €5.4bn, representing a 22% increase year on year (see Graph above). The five-year average transaction volume for mixed-use property stands at just €4.0bn. Large district developments account for a significant proportion of the recent increase in investment, with notable examples including the Macherei in Munich and the Cologneo I in Cologne.
It is also apparent when analysing investment in mixed-use property that the proportion of development sales is significantly higher compared with the established property types. While development acquisitions accounted for only around 11% of the transaction volume in the office, retail and industrial/logistics sectors, the corresponding figure for mixed-use property was approximately 46%. This is likely a reflection of the fact that urban planners have been pushing a departure from single use property for a number of years. Accordingly, there has been an increasing emergence of mixed-use urban quarters, which are increasingly attracting the attention of institutional investors. In view of this transformation, mixed-use property can be expected to account for a growing share of the investment market over the long term.
For further information, like the top 10 transactions in October, please see the PDF file.