CA Immo Annual Report 2008 (.pdf)

MAnAGeMent RepoRt
tHe ReAl eStAte MARKet
In GeRMAny
44
Following the sustained and rapid phase of expansion
that reached its peak in 2007, economic decline characterised
2008. As the financial market crisis coincided
with a general downturn in the economic cycle, the turnover
of real estate transactions collapsed in the second
half of the year in Germany as yield increased. According
to the Ifo Institute, the overall economy in December
2008 had reverted to the level of 2002/2003.
The investment market
In 2008, total turnover for the German commercial real
estate market fell by around 65 % to stand at € 20.7 bn.
the effects of the financial market crisis forced the closure
of numerous open-end property funds for fixed periods
as banks tightened their lending requirements and
potential consumers waited for purchase prices to fall
further. All of these factors in combination had brought
the real estate investment market to a virtual standstill by
the end of 2008. the steepest fall over the year as a whole
was in the demand for office properties, which declined
by 77 % compared to 2007. In the hotel property segment,
only properties with long-term lease agreements were in
demand. Real estate investment business centred on the
prime locations of Berlin, Düsseldorf, Frankfurt, Hamburg,
Cologne and Munich.
owing to the fraught situation on the capital markets
and the deteriorating wider economy, returns on real
estate increased in virtually all of Germany’s property
strongholds, especially in the fourth quarter of 2008. net
starting yields for prime properties have now climbed
to over 5 % across the board, pushing property values
downwards. Rental prices are also likely to fall in this
area in the short to medium term. Mindful that security is
preferable to yield, investment transactions are intensifying
the focus on properties with the lowest possible risk,
characterised by lengthy rental contracts, excellent quality
fittings and creditworthy tenants.
The office market
Vacancy rates on the office markets were still falling at
the end of 2008. As regards the office centres of Berlin,
Düsseldorf, Hamburg, Frankfurt, Cologne, Munich and
Stuttgart, the total vacancy rate again fell sharply from
the previous year’s level of 9.7 % to 8.6 % by year end.
In overall terms, vacancy tended to decline in modern,
newly built premises; in future, rising vacancy levels in
older properties no longer compliant with market conditions
will expand the base vacancy rate.
owing to the fact that demand levels remained high
throughout the first two quarters of last year and the
availability of modern, centrally located office space
declined as vacancy dropped sharply, peak rents rose
again in all locations.
At the present time, it is impossible to predict the
number of office jobs that will be lost in 2009 due to
the financial crisis, and the impact this will have on the
demand for office space in Germany. However, demand
is already starting to shift to alternative, centrally located
and lower priced sites, which will suppress peak rents
and raise vacancy levels. At the same time, the restrictive
financing situation is likely to lead to a reduction in
the project volume, which will mean a clear marketing
advantage for projects in progress.
The residential property market
According to figures published by the Federal Statistical
office, the demand for residential property in Germany
will continue to rise. Accordingly, the demand for property
ownership will also remain consistently high. Current
levels of excess demand will be maintained, especially
in the larger German conurbations. As a result, the
residential market in German cities still holds a great deal
of development potential. In overall terms, prices have
risen in both the rental and ownership segments in Berlin,
Frankfurt, Cologne and Munich. the highest average
rents in good locations are in Frankfurt (€ 13.50/sqm) and
Munich (€ 12–14/sqm); Berlin and Cologne are relatively
affordable at € 7–11/sqm.
The retail market
In Germany, CA Immo focuses on the realisation of local,
small-scale retail businesses. the financial market crisis
had no visible effect on consumer behaviour in 2008, and
thus no impact on the rental market for retail premises.
expanding product ranges led to greater demand for floor
space, which in turn was reflected in rising rent prices.
Across Germany, rent prices for large units (120–260 sqm)
rose by an average of 3.5 %; for the smaller units (60–120
sqm), the mean increase was 2.98 %. For the country as a
whole, the average peak rent stood at € 60/sqm. purchase
prices for business premises in prime sites were high,
and unlikely to be forced downwards by the financial
market crisis for some time. By contrast, the investment
volume in shopping centres, factory outlet centres and
specialist retail centres decreased in the second half of
the year. Although Germany still tops the european table,
total turnover fell from € 11.3 bn in the previous year to
€ 6.1 bn in 2008.
The hotel property market
Hotel chains continued to expand in Germany in 2008.
Both the number of companies and the number of hotels