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German investors pump $151bn into RE over past decade

Over the last 10 years, German institutional capital sources have pumped more money into overseas markets than North American, Middle East and Asian investors, according to Jones Lang LaSalle

Institutional investors from Germany have tipped more money into overseas real estate markets in the last 10 years than any other group of investors, according to new research by Jones Lang LaSalle (JLL). 

Between the first half of 2004 and the first half of 2014, investors from Europe’s most populous country have invested a total of $151 billion into international real estate, making them “the most active and important source of cross-border capital compared to North American, Middle Eastern and Asian investors,” the report stated.

According to the study, some 82 percent of German outbound investment has been allocated to mature markets in Western Europe and North America. The majority has been targeted at core office product, with retail investment accounting for a further 13 percent.

“German groups have continued to invest outside of their domestic market during the last 10 years, even when other investors have reigned in cross-border activity,” JLL said. “This has put them ahead of capital outflow from North American ($133 billion) and UK ($100 billon) sources.”

Matt Richards, head of the firm’s international capital group, added: “Despite being challenged by Norwegian, Chinese and Canadian investors, with their established presence in many global property markets, we anticipate German investors will maintain their international investment focus.”

The research comes ahead of EXPO Real, the annual international property trade fair held in Munich. Scheduled for next week, it is one of the biggest annual gatherings on the real estate calendar.

It also comes at a time when experts are saying that, not only have German investors been the most active over the past decade, Germany itself currently is the most sought-after real estate destination in the world. 

In an article to be published in PERE's October issue, Matthias Leube, head of real estate in Germany for AXA Real Estate, noted that the country is actually “top of the list” for most of its investors. The country’s favorable macroeconomics is a big reason, with Munich and Berlin being the two most popular cities that capital wants to enter, he revealed in PERE’s German roundtable.

Indeed, many of Frankfurt’s skyscrapers have either been sold recently, are under offer, or will come to market shortly. The famous 63-story MesseTurm, for example, which is the second highest office in Germany, is said to be under offer to The Blackstone Group on behalf of its fourth European Real Estate opportunity fund. The same firm is rumored to be buying a second skyscraper next to MesseTurm.

Meanwhile, the 47-story Trianon tower, which was built in 1993 and serves as the headquarters of Deka Bank, is about to come to the market, according to sources. Madison Realty International acquired a 56.9 percent stake in the high rise in 2012 from Morgan Stanley’s P2 Value fund, which was liquidating. The whole property soon will be available to buy.

Outside of the core financial district, other properties have been placed on the market as well. For example, IVG Immobilien – taken over by creditors this summer – has put on the market The Squaire office complex near Frankfurt’s international airport. The target price reportedly is €850 million. And, in one of the larger transactions already to have taken place, Tower 185 in Frankfurt, occupied by accountant PwC, was sold last year to PwC’s pension fund for a chunky number.

In the German Roundtable, Peter Schreppel, who heads up CBRE’s business in Germany, stated: “It is a lively market. While transaction volumes are not back to the standards of 2007, when €1 billion per week was traded, it is extremely active. What we as a global company find very interesting is that there is a lot of global money in the market. If you look at the roughly €17 billion that has been traded in the market in the first half of 2014, half of that is from foreign investors and that is what makes the German market very lively.”