Savills World Research Germany Investment

Investment Market monthly Germany

October 2016

Topic of the month Residential property in university cities – still a buy? ■ University cities have repeatedly

■ Indeed, investors who followed

been cited as an alternative to the top seven cities in recent years when it comes to seeking low-risk investment opportunities in the residential market. Such locations, according to the conventional wisdom, would particularly benefit from strong growth in student numbers, thus offering higher rental growth potential than other cities. Furthermore, it was maintained, these markets would benefit from less intense competition than the top seven cities and correspondingly lower purchase prices.

these assertions are unlikely to have regretted their acquisitions. A glance at the relevant data confirms both arguments. The population in university cities* rose by 4.2% between 2011 and 2015 while the number of inhabitants in nonuniversity cities (excluding the top seven markets) grew by just 3.6%. Two thirds of the population growth in the university cities is attributable to the increase in student numbers in these cities. This rise in demand has resulted in strong growth in residential rents. Rents in university cities rose by almost 17% between

2011 and 2015, which is three percentage points more than in non-university cities and one percentage point more than even in the top seven markets. Despite this above-average growth, however, apartment buildings in university cities have been (and remain) less expensive than those in the top seven cities by a multiple of three times rental income (Graph 1). Annual total returns between 2011 and 2015 stood at 14.3% (excluding costs), which was 0.5 percentage points higher than in the top seven cities. savills.de/research

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Investment Market monthly | Germany

October 2016

Topic of the month (continuation) Residential property in university cities – still a buy? GRAPH 1

Average prices of apartment buildings gap university cities to top 7 (right axis) gap non-university cities to university cities (right axis) top 7 (left axis) university cities (left axis) non-university cities (left axis)

25

500

20

400

15

300

10

200

5

100

bps

university cities have proven a sound decision to date. However, is that still the case? It is a fact that growth in student numbers in Germany has slowed steadily in recent years. The growth rate has fallen from 7.4% in 2011 to just 2.2% last year. The dynamic growth in previous years, primarily driven by the suspension of military service in Germany as well as a double cohort of high school graduates in many federal states, is likely to have come to an end and student numbers have probably peaked. In some university cities (namely Erlangen, Greifswald and Jena) student numbers have already declined over the last five years. Overall, population growth in university cities is expected to slow and may even be weaker than in non-university cities, as was already the case last year (Graph 2).

multiplier

■ Consequently, investments in the residential markets of

■ The declining momentum in terms of demand is accompanied

by above-average construction activity. Between 2010 and 2014 the average number of permitted apartments per year in university cities equated to 0.8% of the housing stock. In nonuniversity cities, permissions equated to just 0.4% of existing stock. Furthermore, even in the top seven cities, permissions were lower than in university cities at an annual average of approximately 0.6% of the housing stock. ■ The weakening growth in demand and relatively rapid

expansion in supply cast a shadow over the rental growth prospects in university cities. While these remain attractive to stability-oriented investors compared with the significantly more expensive top seven cities, for opportunity-driven investors non-university cities are probably the better choice. In view of the converging rental growth potential, the substantial discount of 270 basis points compared with university cities (Graph 1) appears too high.

0

0 2010

2011

2012

2013

2014

2015

Source: Bulwiengesa, Savills

GRAPH 2

Population growth University cities

2.0%

non-university cities

1.5%

1.0%

0.5%

* The classification used here includes all cities with a student population of at least 20% of total inhabitants. This currently comprises the following 13 cities: Aachen, Darmstadt, Erlangen, Gießen, Göttingen, Greifswald, Heidelberg, Jena, Marburg, Passau, Regensburg, Tübingen and Würzburg.

0.0% 2007

2008

2009

2010

2011*

2012

2013

2014

2015

Source: Federal Statistical Office, Savills / * no figures due to census

The month in brief Commercial 12-months volume at €50.0bn, residential at €12.3bn •

In October 2016, approx. €3.6bn was invested in the commercial real estate market in total. In comparison: In the same month last year (October 2015), the transaction volume was around €4.9bn. The average monthly transaction volume was at €4.2bn during October 2015 and September 2016. In the last twelve months some €50.0bn were invested, and therefore 2% less compared to the figure of last month.

•

On the residential real estate market approx. €2.0bn was invested in October 2016. In the same month last year, the transaction volume was at around €0.6bn. In the past twelve months the average monthly transaction volume amounted to €1.0bn. The transaction volume of the last twelve months summed up to €12.3bn, representing an increase of 12% compared to the figure of last month.

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Investment Market monthly | Germany

October 2016

Commercial investment market Overview TABLE 1

Transaction volume and prime yields Transaction volume (€m, 12 months rolling)

Prime Yield Office

Prime Yield High street property

Oct 2016

against Oct 2015

against Sep 2016

Q3 2016

against Q2 2016

Q3 2016

against Q2 2016

Berlin

5,351

-32%

-21%

3.7%

-20bps

3.3%

-10bps

Düsseldorf

2,034

-21%

-7%

4.1%

+/-0bps

3.8%

+/-0bps

Frankfurt

4,646

-25%

+3%

4.0%

+/-0bps

3.5%

+/-0bps

Hamburg

3,753

-24%

-4%

3.9%

-10bps

3.6%

-10bps

Cologne

2,000

-6%

-5%

3.9%

-20bps

3.6%

-10bps

Munich

4,952

-12%

-4%

3.5%

-20bps

3.4%

-10bps

Stuttgart

1,579

+14%

-8%

3.6%

-60bps

3.9%

+/-0bps

49,969

-10%

-2%

3.8%

-17bps

3.6%

-5bps

Germany

*

Source: Savills / * prime yields = Ø Top 7

GRAPH 3

GRAPH 4

Transaction volume

Deal size and number of transactions

transaction volume, monthly (left axis) transaction volume, past 12 months rolling (right axis)

50

9

45

8

40

7

35

6

30

5

25

4

20

3

15

2

10

1

5

€bn

10

0

0 2011

2012

2013

2014

2015

30

2,400

25

2,000

20

1,600

15

1,200

10

800

5

400

55

2016

€m

11

number of transactions, past 12 months rolling (right axis)

60

past 12 months

€bn

12

average transaction size, past 12 months rolling (left axis)

0

0 2011

2012

2013

2014

2015

Source: Savills

Source: Savills

GRAPH 5

GRAPH 6

Transaction volume by type of use

Transaction volume by location*

past 12 months

past 12 months

past 5 years

40% Other

past 5 years

Berlin 16%

Office 50%

30%

12%

Stuttgart Retail

Düsseldorf

8%

20%

4%

10% 0%

0% Munich

Development land

2016

Frankfurt

Industrial / Logistics

Cologne

Hamburg

Hotel

Source: Savills

Source: Savills / * share of other locations 53% (past 12 months) and 49% (past 5 years) resp.

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Investment Market monthly | Germany

October 2016

Commercial investment market Buyer and seller groups GRAPH 7

GRAPH 8

Transaction volume by origin of buyer

Transaction volume by origin of seller

past 12 months

past 5 years

past 12 months

Germany 70%

60%

60%

50% Other

50%

40%

Remaining Europe

30%

Other

40% 20%

10%

10%

0%

0%

North America

Middle East

Asia/Pacific

Source: Savills

TABLE 2

TABLE 3

Top 10 buyer groups

Top 10 seller groups Volume (€m)

Volume (€m)

Buyer

# past 12 months

Open-ended special fund

2

North America

Asia/Pacific

Source: Savills

1

Remaining Europe

30%

20%

Middle East

#

past 5 years

Germany 70%

Seller

Ø past 5 years

past 12 months

Ø past 5 years

14,104

8,171

1

Developer

7,839

6,573

Other asset manager

7,363

4,359

2

Open-ended special fund

4,670

3,038

3

Listed property company

4,870

4,005

3

Closed-ended fund

4,254

3,193

4

Developer

3,858

2,765

4

Other asset manager

4,104

3,533

5

Private-equity fund

3,072

3,451

5

Corporate

3,791

3,248

6

Private investor / Family office

2,780

2,397

6

Listed property company

3,603

2,419

7

Corporate

2,092

2,302

7

Private investor / Family office

3,406

1,820

8

Closed-ended fund

1,846

2,666

8

Private-equity fund

2,695

2,901

9

Insurance company / Pension fund

1,836

2,473

9

Other

1,954

855

10

Open-ended public fund

766

1,276

10

Bank

1,416

1,493

Source: Savills

Source: Savills

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Investment Market monthly | Germany

October 2016

Commercial investment market Transactions in detail TABLE 4

Top 20 transactions of the month* Property / Portfolio

Location(s)

(Main) Type of property

Volume (€m)

Area (sq m)

Portfolio (17 properties)

i. a. Düsseldorf, Hamburg, Stuttgart

Office

ca. 630

256,000

Portfolio

n/a

Industrial property

ca. 450

n/a

Portfolio (2 properties)

Frankfurt

Office

ca. 160

Weiße Wiek Ferienanlage

Ostseebad Boltenhagen

Hotel/gastronomy

Am Römerfeld 6

Bondorf

Ganghoferstraße 31

Buyer

Seller

WealthCap Wealth Management Capital Holding GmbH

Savills Investment Management

unknown Pension Scheme, GARBE Holding AG & Co. KG.

GARBE Holding AG & Co. KG.

57,700

TLG Immobilien GmbH

undisclosed

undisclosed

30,000

Lindner Investment Management GmbH (LIM)

unknown Investor

Warehouses/ Logistics

ca. 85

100,000

Invesco Real Estate, Invesco Real Estate

unknown Corporate (Germany)

Munich

Office

ca. 75

11,000

Deka Immobilien Investment GmbH

LBBW Immobilien Development GmbH

Portfolio (8 properties)

i. a. Darmstadt, Dreieich, Düsseldorf

Office

ca. 73

65,100

GxP German Properties AG

unknown Investor

Shopping-Cité

Baden-Baden

Retail

undisclosed

17,900

REAL I.S. AG Gesellschaft für Immobilien Assetmanagement

TIAA Henderson Real Estate (TH Real Estate)

Maxxon

Eschborn

Office

undisclosed

23,800

Real Capital Holding

IFM Immobilien AG

Portfolio (11 properties)

n/a

Mixed-use property

undisclosed

n/a

M7 Real Estate

unknown Investor

Siemens Industrieparks Karlsruhe

Karlsruhe

Mixed-use property

undisclosed

80,000

Beos AG

Siemens Kapitalanlagegesellschaft mbH

Martin I & II

Munich

Office

undisclosed

22,300

Axa Investment Managers

unknown Investor

Portfolio (3 properties)

Erlangen, Nuremberg, Weiterstadt

Office

undisclosed

29,500

Pegasus Capital Partners GmbH

DO Deutsche Office AG

Kö 106

Düsseldorf

Office

undisclosed

17,000

Blackbear Real Estate GmbH

unknown Investor

Das Carré

Heidelberg

Mixed-use property

undisclosed

13,600

Unmüssig-Gruppe

IFM Immobilien AG

Neumarkter Straße 18

Munich

Office

undisclosed

23,600

unknown Investor

undisclosed

Portfolio (3 properties)

Brilon, Münster, Rastede

Warehouses/ Logistics

ca. 37

40,000

Geneba Real Estate Investments

unknown Investor

Wilhelm-Quarree

Berlin

Office

undisclosed

10,000

Nicolas Berggruen Holding GmbH

unknown Private Investor (Germany)

Aachen Arkaden

Aachen

Retail

undisclosed

27,100

Lone Star Germany GmbH, JP Morgan Asset Management

Propertize

Portfolio (6 properties)

Berlin, Bremen, Düren, Halle, Leipzig

Retail

undisclosed

33,600

unknown Private Investor

GAM Retail Portfolio Holding GmbH

Source: Savills / * only published transactions are shown, measured by volume

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Investment Market monthly | Germany

October 2016

Residential investment market Overview and market structure TABLE 5

Transaction volume and prices* Transaction volume (€m, 12 months rolling)

Prices (€ per unit, 12 months rolling)

Oct 2016

against Oct 2015

against Sep 2016

Oct 2016

against Oct 2015

against Sep 2016

A-Cities

5,760

-32%

+4%

133,400

+42%

-6%

B-Cities

1,374

-68%

+11%

95,800

+52%

+/-0%

C-Cities

1,031

-44%

+1%

88,500

+17%

-6%

D-Cities

1,151

+21%

+4%

46,500

-23%

+3%

Other

3,032

-47%

+46%

57,700

+2%

+14%

Germany

12,348

-42%

+12%

84,300

+19%

-1%

Source: Savills / * City classification based on Bulwiengesa

GRAPH 9

GRAPH 10

Transaction volume

Deal size and number of transactions

transaction volume, monthly (left axis) transaction volume, past 12 months rolling (right axis)

€bn

9

20.0

7

17.5

6

15.0

5

12.5

4

10.0

3

7.5

2

5.0

1

2.5

0

0.0 2012

2013

2014

2015

1,400

350

1,200

300

1,000

250

800

200

600

150

400

100

200

50

22.5

8

2011

number of transactions, past 12 months rolling (right axis)

25.0

past 12 months

2016

€bn

10

average number of units per transaction, past 12 months rolling (left axis)

0

0 2011

2012

2013

2014

Source: Savills

Source: Savills

GRAPH 11

GRAPH 12

Number of transactions by size

Traded units by city category*

past 12 months

past 5 years

past 12 months

50 < 100 units 40%

40%

30%

30%

20% > 5,000 units

10%

Source: Savills

2016

past 5 years A

20% 100 < 250 units

Other

B

10%

0%

1,000 < 5,000 units

2015

0%

250 < 1,000 units

D

C

Source: Savills / * based on the Bulwiengesa classification

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Investment Market monthly | Germany

October 2016

Residential investment market Market players, prices and transactions in detail GRAPH 13

GRAPH 14

Transaction volume by origin of buyer

Transaction volume by origin of seller

past 12 months

past 5 years

past 12 months

Germany 100% 80%

80%

60%

Other

past 5 years

Germany 100%

Remaining Europe

60%

Other

40%

40%

20%

20%

0%

0%

Middle East

North America

Middle East

North America

Asia/Pacific

Asia/Pacific

Source: Savills

Source: Savills

GRAPH 15

GRAPH 16

Transaction volume by type of investor Purchases, past 12 months Net investments, Ø past 5 years

Remaining Europe

Development of prices

Sales, past 12 months Net investments, past 12 months

Open-ended special fund Housing association Public administration Other asset manager Insurance company / Pension fund Listed property company Private-equity fund Leasing company Sovereign wealth fund Open-ended public fund Corporate Bank Other Private investor / Family office Closed-ended fund Developer

Average price per unit, past 12 months rolling 100,000 90,000 80,000 70,000

€/sq m

60,000 50,000 40,000 30,000 20,000 10,000 -4

-3

-2

-1

0 €bn

1

2

3

4

0 2011

Source: Savills

2012

2013

2014

2015

2016

Source: Savills

TABLE 6

Top 5 portfolio transactions of the month* Name of portfolio Location(s) i. a. Berlin, Bremen, Düsseldorf, Emden, Garching

Volume (€m)

Number of units

Buyer

Seller

Morgan Stanley Real Estate Investment GmbH

BGP Investment S.à r.l. (BGP)

17,000

ca. 1,177

i. a. Bamberg, Barsinghausen, Berlin, Dortmund, Düren

3,500

undisclosed

PATRIZIA Immobilien Kapitalanlagegesellschaft mbH

Bouwfonds IM

i. a. Berlin, Düsseldorf, Hamburg, Cologne, Leipzig

1,200

ca. 135

unknown Institutional Investor (Europe)

unknown Family Office

237

undisclosed

unknown Public Administration (Germany)

GBW Gruppe

1,247

ca. 96

Bayrische Versorgungskammer, Corestate Capital AG

Youniq AG

Munich Bayreuth, Frankfurt, Mainz, Potsdam

Source: Savills / * only published transactions are shown, measured by volume

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Investment Market monthly | Germany

October 2016

Savills Germany Savills is present in Germany with around 200 employees with seven offices in the most important estate sites Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. Today Savills provides expertise and market transparency to its clients in the following areas of activity:

HH

B

D

Our services

C

»» Purchase and sale of single assets and portfolios »» Corporate Finance – Valuation »» Leasing of office and retail buildings »» Leasing and sale of industrial and warehouse properties »» Landlord and Occupier Services

F

S M

www.savills.de

Savills Germany Please contact us for further information

Marcus Lemli CEO Germany +49 (0) 69 273 000 12 [email protected]

Marcus Mornhart Office Agency +49 (0) 69 273 000 70 [email protected]

Karsten Nemecek Corp. Finance - Valuation +49 (0) 30 726 165 138 [email protected]

Draženko Grahovac Corp. Finance - Valuation +49 (0) 30 726 165 140 [email protected]

Matthias Pink Research +49 (0) 30 726 165 134 [email protected]

Savills is a leading global real estate service provider listed on the London Stock Exchange. The company, established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows and now has over 700 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East with more than 30,000 employees worldwide. Savills is present in Germany with around 200 employees with seven offices in the most important estate sites Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. This bulletin is for general informative purposes only. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The bulletin is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. © Savills November 2016

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