Germany's recovery from years of high unemployment and subdued economic conditions means it now offers huge potential for commercial property investors.
That is according to Brett Robinson, chief executive of Seven Dials European Property fund, who adds Munich, Frankfurt and Dusseldorf are the key locations.
“The German market really has been the sleeping giant of Europe both in terms of economic and property market performance,” he says.
“As it is starting to wake up on both counts, investors are taking a keen interest.
“The economy has definitely turned the corner and the crucial development that we will be looking for is further improvement in the employment situation, particularly in the service sector.
“This will spur demand on the occupier side in the office markets, which has been very flat in recent years.”
Robinson says Germany’s export markets are looking buoyant and its geographical position means it acts as the gateway from East to West Europe.
He adds: “When investing in Germany you must really do your analysis at the level of regional economies as the country’s economy is very decentralized and thus location analysis becomes crucial.”
Seven Dials describes Düsseldorf as a good general economic backbone, being the base for many media and financial companies, as well as a large stock exchange, the Düsseldorfer Börse.
It says a large number of Japanese company headquarters and financial institutions are also based in the city on the Rhine resulting in a potential double benefit of recovering German and Japanese economies spurring occupier demand in this market.
Hamburg is also considered a great trade location, says Seven Dials, with a large port and good links to the strong Nordic economies.
Robinson says: “In our view Munich is probably the strongest economy in Germany with a powerful financial sector.
“One does have to be careful buying offices though, despite the good opportunities on offer, as there was an oversupply resulting from the tech boom/bust which hit the economy hard.
“But the ‘right’ offices, particularly ones with asset management angles, could generate very strong returns.”
He adds: “Finding the right partner to invest with is crucial given not only location issues and what is still regarded as rather opaque market practice. Another factor to consider is that a number of open-ended funds are net sellers in the German market and are potentially ‘flushing out the tanks’ – so one must be wary of not buying overly problematic assets.”
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