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The growth story is set to continue in Germany, but investors are more cautious than during the pre-crisis boom years and there is more equity in the game, experts agreed at PropertyEU’s Outlook Briefing on Germany which was held in Frankfurt in late November.

The various labels pinned on the country in the last five years – from ‘safe haven’ to ‘boring but stable’, 'rock solid' and ‘real estate magnet’- are set to remain firmly in place, it emerged at the briefing which was held at the offices of law firm Ashurst in Frankfurt.

Germany’s trump card in attracting investors is its solid macro-economic fundamentals, keynote speaker Peter Schreppel, CEO of Germany at CBRE, told the audience. GDP growth is seen averaging 1.5% in the period 2015-2019, but, he stressed, that is coming from a strong base - unlike a number of other European markets like Ireland and Spain which may post higher growth rates but are coming from much lower starting points.

In addition, the German unemployment rate of 4.5% is the lowest in Europe. ‘These are key drivers for foreign investors coming into the German market,’ said Schreppel. ‘Market size, strong fundamentals and an improving business climate all add up to the global view that Germany is an area of interesting investment.’

Germany’s far lower volatility than, say, London’s – as borne out by the moderate growth in office rents – is a key point in the country’s favour, Schreppel noted. ‘In 2007 people said Germany was boring – even though transaction volumes, like now, were strong. Germany is still fairly boring but that is what people are looking for. Stability is key,’ he said.

Differences with 2007
Drawing a comparison with the pre-crisis boom years, Schreppel said the situation now was completely different despite near-equal transaction volumes. The latest research from CBRE shows deal volumes heading for a new cyclical peak in 2015 of over €50 bn compared with €57.5 bn in 2007. In the first nine months of the year, volumes hit €38.1 bn compared with €25.4 bn in the year-earlier period.

‘Transaction volumes are virtually the same now as they were in 2007 – around €1 bn worth of trades a week – but the big difference is the level of equity that is being put into transactions these days,’ Schreppel said. ‘In 2007 we saw transactions in which investors did not put a penny on the table. It was all debt driven. Today investors are actually putting money on the table and the equity portion is larger than in 2007 so that is more stable.’

Another big difference is that the leasing markets are not detached from the investment markets, Schreppel noted. ‘We’re seeing leasing levels picking up so the fundamentals are good.’ A key indicator of the sustained upward trend is evidence showing that prime office rental growth is accelerating for most German cities, with only Hamburg showing a slowdown.