In 2018, the majority of foreign investments flowed from EMEA into Germany while the capital flows from other economic regions recorded declines. The forecasts for subsequent developments are all the more favorable.
The investment boom on the German real estate market in 2018 was primarily shaped by landmark deals in the top 7 locations. Above all, foreign investors were more frequently able to stave off German competition in major deals worth upwards of EUR 250 million. While the share of international capital in the market development fell 6 percent overall year on year to EUR 23.7 bn, or a share of 40 percent, its involvement in major deals was considerably higher at 53 percent of the transaction volume.
Broken down according to world regions, the largest share of foreign capital originates from EMEA at 23 percent. The inflow amounted to EUR 14.1 bn and is thus around 9 percent higher than in 2017 against the overall declining trend. The United Kingdom reached number one in this area (EUR 2.8 bn, 5 percent market share). British asset managers in particular are buying German real estate as gatekeepers on behalf of investors from outside Europe. The Middle East is increasingly gaining importance with Israel leading the way (EUR 2.3 bn; 4 percent market share).
Based on countries of origin, the USA is ahead again after having invested EUR 4.2 bn in German commercial real estate, and thus contributed 7 percent of the total volume. The maturity of their domestic market, more restrictive financing terms set by banks and the price level reached in the country’s top markets have caused US investors to look across the ocean despite less favorable exchange rates speaking against such moves. Due to the shrinking investment volume above all from Canada, the Americas region recorded an 11 percent decline overall. This should be only temporary, however. In view of the limited product availability in their own country, core-oriented Canadian investors in particular are seeking opportunities in Germany.
Plummeting 36 percent to EUR 3.8 bn, the decrease among APAC countries before year’s end stood out in particular. The politically mandated withdrawal of major Chinese investors was a decisive factor in this case. Singapore and South Korea are the most active Asian nations at EUR 1.5 bn each. Given their very high risk aversion, investors from the Asia-Pacific region are examining the German market very closely. This should bring further new market entries in the coming months. One prime example is Taiwanese financial group Fubon Life buying the Eurotower in Frankfurt after three years of probing the market. We also expect the first purchases by Australian pension funds in the near future.
CEO, Colliers International Germany