Investors' attempts to acquire new German properties are being frustrated by the shortage of development finance which in turn is severely limiting the supply of new product.
This was one of the key findings of PropertyEU's latest Investment briefing on the German market.
Panel members told the briefing that a significantly limited supply across all sectors is reducing the opportunities for funds and developers to invest and hampering any demand for new space. This is particularly the case in the office sector where new investment opportunities are acutely short, the panel said.
Alexander von Cramm, chief financial officer of Munich-based REIT Prime Office said: ‘Practically nothing is being built. New buildings are not coming on stream, and rents are only inching up. There is demand for office space which is slightly increasing, but there’s almost no supply coming through.’
‘If nothing is being built then there’s no new demand, there’s no activity.’
But Philip La Pierre, head of Investment Management Europe at Union Investment Real Estate, said that while the situation remains a concern, it also presents opportunities for investors able to secure funds, provided developers present top-quality new buildings to the constrained market.
‘In the office market you need to be very careful what you’re buying. You need to be in the top locations to attract tenants. If you need any kind of rental growth you need to be in those locations,' he said.
‘The ‘B’ locations are the difficult ones; they’re not performing at all. If you want to go into a ‘B’ city you need your asset management team on the ground and to be very wary of where you go.’
The challenge of developing new property, said Marcus Cieleback, head of research at Patrizia Immobilien, was in ensuring potential tenants’ demands were being fully met in order to prevent the property failing.
Cieleback said: ‘If you have a quality property in a good location you will be able to let it. But if you’re lacking a couple of things you will have difficulties; tenants are getting very sensitive.’See the links below for additional news stories and the full report from the eventPropertyEU @MIPIM 2013
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