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The big German open-ended fund managers may be withdrawing from the Dutch market, but the same is not true of Dutch investors in Germany.

Dutch real estate investors are becoming increasingly interested in Germany, according to Matthias Euler, CBRE senior director and co-head of international investment capital markets, said.

In the past, UK, Irish and US investors were particularly dominant in Germany, but interest is now more international, Euler said.

‘We’re seeing investors from all over the world. Chinese money is looking seriously although they have not invested yet. We’re also seeing investors from Korea and Malaysia and have meetings on a weekly basis. It’s just a matter of time before they invest,’ Euler said presentation at the PropertyEU Germany Investment Briefing at the Provada real estate fair in Amsterdam in June. ‘Germany is hotter than ever.’

INVESTMENT PLATFORMS
Many investors opt to operate via large investment managers with local platforms like Henderson and Invesco, he added. ‘We’re also seeing Middle Eastern money from Abu Dhabi and Qatar. We didn’t see that five years ago.’ Closer to home, French institutional investors are pumping funds into Germany as well, Euler noted. ‘We’re seeing more money from France from investors who are frightened to lose money through local tax increases. Last year, 10% of investment came from France.’

Aside from retail, international investors are primarily focused on the office segment in the top 5 German cities where yields have dipped under the 5% mark to 4.75%. ‘From the perspective of the Koreans where bond yields are only 2.3%, Germany is still attractive,’ Euler said. That’s why they end up in Germany. And they’re not afraid of bidding far below 5%. The availability of offices is not that great although the liquidation by German open-ended funds and the banks is bringing some product to the market. But I’m not convinced that hot and interesting product is part of that supply.’

Germany’s stability and predictability are key reasons why foreign investors are flocking to the country’s property market, according to Marcus Cieleback, head of research at Patrizia Immobilien, which recently expanded to the UK and France with the purchase of real estate investment and asset management company Tamar Capital Group. Positive economic prospects are also supporting Germany’s safe haven status, he added. ‘There’s no growth elsewhere but that is also a drawback. Germany’s major export markets are not in a good position and that is hampering growth.’

DESTINATION OF CHOICE
Nevertheless, Germany emerged as the most popular destination for international real estate investors in a survey held by CBRE earlier this year, and scored even better than the UK and France. And in terms of destinations, no less than four German cities scored in the top 8 for most attractive purchases, Euler pointed out: Germany’s GDP growth is still positive at 0.5% while its unemployment rate is at a record low of 5%, he added. By contrast, unemployment is growing in the neighbouring Netherlands and is expected to top 7.5% this year. ‘This is the first time that Germany has a lower unemployment rate than the Netherlands. Germany is a powerhouse in a struggling Eurozone.’

While Dutch investors are attracted to the German market, they are not the easiest to please, according to Timothy Horrocks, head of Germany at Henderson Global Investors. ‘Dutch investors are very sophisticated and their demand is for very specific strategies. They often have a long shopping list but the product can be difficult to source.’

The full report on the Germany Investment Briefing appears in the July-August edition of PropertyEU. You can read it as well view the presentation and watch the interviews from the event by clicking on the hyperlinks below.