Henderson Global Investors is targeting out-of-town retail warehouses in Germany for its German retail fund, Mike Sales, head of property investment, told PropertyEU at EXPO REAL. The fund manager expects to close two deals by the end of the year and has another two in the pipeline, he added.

Food-anchored retail warehouses in Germany still make sense in the current climate, Sales said. ‘A big box with a food anchor might still go for a 7% initial yield at a debt rate of approximately 3% with a 6.5-7% income return (cash on cash rate).’ Germany also stands out as a relatively safe haven, he added. ‘Vacancy levels are relatively low... Germany is the stable mother of all.’

In total, Henderson Global Investors has some EUR 1 bn to spend, not only on German retail but also on Central London offices, US residential property and its pan-European funds. In some retail segments, pricing is getting to the point that it is no longer attractive, Sales said. According to market rumours, a US institutional investor is closing in on the acquisition of the PEP shopping centre in Munich for a yield below 5%. Earlier this year the Canadian pension fund CPPIB acquired a 50% stake in Centro Oberhausen, reportedly for a yield of 4.75%.

Pointing to global economic uncertainties and ongoing turbulence in capital markets, Sales said many investors will be asking themselves whether they should sit on their cash and wait with prices for core assets in prime locations close to the peak levels of 2007. ‘Investors need to be realistic about returns. With little or no prospect of economic growth, it’s all about cashflow and capital protection. Investors need to stick to the fundamentals.’ But, he added, there was a good case for including property as part of the mix given the volatility of equity markets and the fact that bonds have become less attractive.