2012 German portfolio transactions reached highest volume since 2007According to Savills the transaction volume for residential portfolios hit approximately ?10.45 billion in 2012, representing the highest level since 2007 and marking a 46% year-on-year increase.
The year was characterised by large transactions of above 10,000 units according to Savills, a trend that was last at the forefront of the market during 2008. Five portfolios in this size bracket changed ownership in 2012 including properties belonging to LBBW, BayernLB (DKB Immobilien) and the federally-owned TLG. Consequently, the number of transacted units in this period increased by 65% to almost 200,000 although the actual number of transactions decreased to 159, from 207 in 2011.
Matthias Pink, head of research at Savills Germany, says: “Large-scale deals contributed significantly to the high transaction volume recorded in 2012, however all size categories saw a year-on-year increase except the smallest, of less than 800 units. As a result of this the average deal size more than doubled compared with 2011.”
According to Savills data German investors were behind 75% of residential portfolio transactions in 2012 but the firm expects the comparatively low share of foreign investors to increase in 2013 due to rising levels of interest from private equity funds. Savills research shows that listed real estate companies were by far the most active group of investors into German residential packages in 2012, investing over ?4 billion. Insurance and pension funds followed with almost ?1.5 billion of direct investments and another ?0.7bn invested through special funds. Private equity funds complete the top three investor groups of 2012, having spent over ?1.2 billion on residential packages in this period.
Karsten Nemecek, managing director of corporate finance, says: “The high transaction volumes recorded in 2012 underpin the importance of German residential property to institutional investors. Having been largely ignored for a number of years this real estate sector in Germany is now the first choice for risk-averse investors, both domestic and international. Residential properties are also a popular asset class with financing banks, which helps to fuel the market’s liquidity.”
While there are fewer portfolio sales with more than 10,000 units pending in 2013 compared with 2012 (for example GBW with approximately 33,000 units), Savills expects to see a marked increase in the number of transactions involving assets perceived as higher risk due to potential refinancing difficulties for a number of loans which are due to mature this year. This combined with rising demand and the potential launch of several IPOs this year, leads the firm to predict another above-average investment volume in the sector for 2013.