34
GERMANY
ISSUE
I
OFFICE PROPERTIES
man institutional investors retained their
dominant market position, accounting for
60% of transaction activity.
EXCEPTIONAL RESULT
The record results of
the office lettings market and low vacancy
rates once more enhances the attractive-
ness of the office market for investors. As
predicted, 2016 was yet another year to
achieve record take-up results. 3.9 mil-
lion sqm of office space was taken up in
Germany’s top 7 office hubs over the last
12 months, an increase of around 12% yoy
and up roughly 25% from the average seen
during the years 2007 to 2016. This is due
to the fact that an ongoing strong German
economy has been able to defy several
dence. Transaction volume will presum-
ably remain high and we expect an in-
vestment volume of between €45bn and
€50bn.
SHORTER HOLDING PERIODS
Shorter
holding periods will likely compensate, at
least in part, for the growing scarcity of
supply. In order to benefit from current
high prices, investors who have purchased
portfolios with upside potential are like-
ly to soon sell those portfolios in view of
current excess liquidity and low interest
rates. Demand for German commercial
properties is likely to gradually decrease,
in part due to the turnaround in interest
rate policy in the US and an expected ex-
pansive fiscal policy under Donald Trump.
Institutional investors who increased their
investments in real estate considerably in
2016 are expected to once again turn toUS
government bonds. German government
bonds, which are once again offering pos-
itive interest rates, are also likely to gain in
significance as alternative investment op-
portunities. Nevertheless, interest rates are
expected to remain historically lowdespite
three key interest rate hikes announced by
the Fed for 2017. No further changes in
ECB monetary policy, i.e. interest rate ad-
justments, are expected apart from the end
of quantitative easing at the end of 2017.
Effects of the frequently cited political
and economic uncertainties on demand
and pricing, however, remain difficult to
predict. Prognoses regarding the probabil-
ity and impact of developments are hard to
make as long as the uncertainty regarding
the start and consequences of the Brexit
negotiations, the extent of the expect-
ed economic nationalism under Donald
Trump and election outcomes in the Neth-
erlands, France and Germany, including
all their ramifications, remain unclear. Al-
though the terrorist attack in Berlin on 20
December clearly shows that Germany is
not immune to exogenous shocks, e.g. rad-
icalization and terror, Germany remains
a comparatively crisis-proof investment
location and is thus more likely to benefit
from the unstable global situation.
«
Ignaz Trombello, Head of Investment International
Germany, Colliers
international crises throughout the year.
Leading economic indicators, which had
dropped due to the Brexit vote, the elec-
tion of Donald Trump and underlying glo-
balization-critical tendencies, were able to
recover by the end of the year. Repeated
flare-ups of the European debt crisis and
the sluggish global economy only led to
brief uncertainty among German busi-
nesses as well. The positive employment
trend continues without disruption.
We expect investment activity to re-
main lively in 2017. In view of robust
fundamentals, which also resulted in an
extraordinarily strong year on German
leasing markets, the German investment
market can face the new year with confi-
Transaction Volume Germany
(bn €)
*expected
2012
2013
2014
2015
2016
2017*
10.00
20.00
30.00
40.00
50.00
0
25.40
30.70
39.80
55.40
52.59
45-50
Largest Group of Sellers 2016
(Transaction volume in bn €)
Source: Colliers
Open-ended Real Estate
Funds/Special Funds
Asset-Manager
Developer
Opportunity Funds/
Private Equity Funds
Corporates/
Owner-occupiers
Other/
Unknown Investors
Real Estate Inc.
Private Investors/
Family Office
Other Investor
Groups aggregated
Insurance Companies
1 0
2 3 4 5 6 7 8 9 10 11 12
