German malls and stores are being snapped up by international buyers at the fastest pace since 2007 even as online shopping lures customers away from the country’s bricks- and-mortar shops.
Almost €6 billion of retail properties were bought by foreign investors in the first half of this year, about three times more than in the same period of 2014, according to an estimate by BNP Paribas Real Estate. Shop sales fell one per cent last year and are forecast to slide again in 2015, according to GfK Group SE, a market researcher.
“The willingness to take risk has increased sharply,” said Joseph Frechen, a Hamburg-based retail analyst at property research firm Bulwiengesa AG. “Some people say we’re seeing the first signs of overheating.”
Declines in footfall and signs that rent growth is stalling aren’t deterring investors so far. Buyers of retail properties in Germany are earning yields of more than 3.5 per cent, compared with more than two per cent in the UK, according to BNP Paribas.
Investors including Blackstone Group and Colony Capital are being drawn by the nation’s stable economy, cheap financing and one of Europe’s largest markets, with retail sales of €408 billion last year.
Signs the market may be peaking are appearing in the rental market, with prime leases, which surged to a record in 2014, losing momentum and likely to end this year little changed, according to BNP Paribas.
“There’s a lot of pressure to invest,” said Joerg Krechky, head of German retail investments for Savills in Hamburg. “Some investors aren’t looking at the online threat very closely because returns in German retail are still better than on sovereign bonds.”
Many investors are buying supermarkets and do-it-yourself retail parks, which are cheaper and more resistant to the online threat, Krechky said.
News by Bloomberg, edited by ESM
