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RETAIL PROPERTIES
Photo: Bayerischen Hausbau/Bikini Berlin
retail properties in these cities range be-
tween 2.75 / 3.00 percent (Munich) and
3.50 / 3.75 percent (Cologne). Returns
tend to differ only slightly between the
top 7 locations, provided that the assets
are of a similar nature. Distinctions are
usually made at a high level between
Core- and Core Plus assets. The returns
remain between three and four percent - as
a rough estimate. An exception to this rule
is Munich: even for high-volume invest-
ments, local trophy investors frequently
endeavour to keep properties in regional
ownership. As a result, properties in prime
locations occasionally change hands at an
initial return rate of around 2.00 to 2.50
percent. Most of Munich continues to be a
“closed-shop” market.The same is true for
Hamburg, albeit to a lesser extent.
The fact that retail rents are not always
increasing steadily has a significant impact
on the pricing of prime retail properties.
Retail rents are at historically high levels.
At the same time, the revenues of the re-
tailers tend to stagnate or even decrease,
owing to new distribution channels such as
e-commerce, multi-channelling and other
changes in consumer behaviour. At least it
would appear that the spread remains con-
sistent, even though capital market returns
and costs are rising in certain areas. It is
possible that purchase price multipliers
could decrease by a few points as a result.
MODERATE RENT LEVELS IN LUXURY RETAIL
LOCATIONS
Compared to other major in-
ternational cities, prime locations in Ger-
many’s top 3 to 5 cities are featuring yet
another positive aspect for investors: rent
levels tend to be comparably low, especial-
ly in established luxury retail locations.
While retail rents have often stagnated or
even decreased in weaker small and me-
dium sized towns over the past few years,
rents for retail space in prime locations of
the top cities have been subject to a steady
and largely positive development.The rea-
son for this is that retailers are rather un-
willing to opt for weaker cities or locations
instead. This fact has even promoted the
rise of an additional shortage of available
assets.
This behaviour consequently impacts
initial returns for the most sought-after
retail property investments in German
prime locations. Because investment se-
curity is in even higher demand than high
returns here. Owing to the ongoing natu-
ral scarcity of available assets, it is to be
expected that returns in Germany will not
increase in the near future, provided that
the capital market environment remains
in a similar state. Compared to the highly
evolved retail property market of the top
3 to 5 metropolitan cities of the USA, the
following is obvious: the divergence of
partially stagnating or even slightly de-
creasing retail rents and higher vacancy
rates pairedwith longermarketing periods
- a good example of this would be SoHo in
New York City - appears to have peaked,
despite increasing purchasing prices or
decreasing returns, respectively.
TOP PROSPECTS FOR 2017
The LÜHR-
MANN company, which had its sec-
ond-most profitable year in the company’s
25-year history in 2016, expects Germany
to continue its positive development as a
location for real estate investments.This is
further reflected in the very good results
of Germany’s retail property market in
2016. LÜHRMANN expects results to be
on a similarly high level in 2017, in line
with the general long-term growth trend
of the past few years. The most important
reasons for this are quite clear: rent levels
of German prime locations are generally
rather moderate. This is particularly true
when compared to the high-price and
often significantly more volatile metro-
politan cities such as London, Paris or
even New York. Good to excellent profit
opportunities for retailers are also an im-
portant factor in this. As a result, Germa-
ny will continue to grow its importance
in the area of retail property investments
for national and international portfolios
of private and institutional investors, as
well as for property developers.
«
Mario Hampel Managing Director
Lührmann Deutschland
“In the area of retail
property investments in
prime locations, Germa-
ny will continue to have
an important role for
national and internatio-
nal portfolios.”
Mario Hampel,
Managing Partner
LÜHRMANN Deutschland GmbH & Co. KG
Around 2 billion euros have been invested in city centre retail buildings,
a share of 20 percent of all retail property investments nationwide.
In Germany’s investment centres prime retail properties were purchased
for a total of around 1 billion euros. Lührmann accounted for a share of
30 percent .
COMPARISON
FACTS & FIGURES
Source: LÜHRMANN Deutschland
2
bn
Highstreet
investment total
TOP 7
Germany
1
bn
