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MIPIM, Cannes, London, 7 March 2012

Jones Lang LaSalle identifies main trends on the German shopping centre investment markets in 2012

New “Shopping Centre Investment Market 2011” report released


Jones Lang LaSalle’s new report “The German Shopping Center Investment Market 2011” shows that investor demand for core products will continue to dominate the German shopping centre investment market in 2012. Highlights from the report include:

  • Large deals ensure a strong increase in the transaction volume for shopping centres
  • German investors dominate the investment market
  • Largest purchaser groups for shopping centres are pension funds and closed-ended funds
  • Strong demand puts pressure on prime yields for top properties
  • Outlook 2012

In 2011 the commercial property investment market in Germany was clearly dominated by the retail sector, which accounted for around 45% of the total transaction volume of €23.5 billion. Shopping centre transaction volume in 2011 grew by around 54% to €4.8 billion, meaning that shopping centre transactions accounted for around 45% of all retail property transactions.

Commenting on the main trends for the shopping centre investment market in 2012, Anke Haverkamp, head of Shopping Centre Investment Germany at Jones Lang LaSalle said: “Investor demand for Core products will continue to dominate the market situation in 2012. However, it is more likely that there will be a greater scarcity of high-quality products in 2012 than in the previous year. For this reason, we expect to see either stable or slightly higher prices in this segment. At the same time, demand for Core+ properties remains very limited. This is due less to a lack of interest or the non-availability of capital, but more to a prevailing sense of great uncertainty on the market. The majority of investors behave in accordance with the general market sentiment, and demand disproportionately large risk premiums for shopping centres that do not fulfil all aspects of the desired profile. This means that sellers and buyers rarely agree on price. We observe strong demand for value-add properties and opportunistic investments. In contrast to 2006/2007, “opportunistic” no longer means uncritical buying behaviour that is focused only on price. On the contrary, a credible story has become decisive for a successful sale. The expected market development in terms of yield compression is no longer enough on its own.”

Sellers in 2012

In 2012 Jones Lang LaSalle expects banks to continue the process already partially started in 2011 of cleaning up their balance sheets. Core properties are more likely to be sold off in individual transactions. On the other hand, it often makes more sense to sell value-add or opportunistic properties as part of a portfolio in order to increase the investment volume and optimise both time and resources. Furthermore project developers, but also asset managers in particular, will typically continue to exploit the good market environment for sales.

Trends among purchasers

The capital structure of large property transactions, which regularly take place in the shopping centre category as well, is becoming increasingly diverse with the development of more complex forms. Equity contributions and alternative financing channels are gaining in importance in this area.

Anke Haverkamp added: “Investors have recognised that shopping centres are a very complex product. Against this background, we are increasingly observing that international capital is joining forces with local retail specialists. This is happening in two ways: first, investors identify a suitable product and bring in an established market player early on during the examination phase. This player later takes on the asset management and frequently buys a minority stake in the investment; second, investors participate in project developments that have already reached a certain stage (e.g. pre-lettings, building permits etc.). For players such as ECE, this approach is not new. What is new is that the circle of the local partners has expanded, as have the number and origin of the investors that are searching specifically for these investments.”

A further trend that is becoming increasingly apparent is the flow of capital from global and European sources that want to invest directly in property, rather than indirectly as in the past, and enter into long-term partnerships. “As a rule, they aim to establish joint ventures with equal shares and seek partners that have an equally long-term view. This development opens up interesting possibilities for property owners. Property companies are able to sustain their asset management role and release capital at the same time. A positive side effect is that property investments are also increasingly becoming liquid in Germany, as long as the underlying joint venture agreements fulfill the demands of international and institutional investors”, says Anke Haverkamp.

All in all Jones Lang LaSalle expects a further interesting year on the German shopping centre investment market. Apparently, the market conditions remain good and shopping centre transactions will account for the majority of the complete retail investment volume once again.

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