Defensive investments on the rise
- Commercial property changed hands for more than €25.2bn in the first half of 2018, a decrease of 8% compared with the corresponding period last year (Table 1). Nevertheless, this still represents the second highest investment volume for the corresponding period during the current market cycle.
- Even in this late stage of the current market cycle, most investors are obviously still within their comfort zone in terms of risk. At the same time, however, defensive investment strategies appear to be gaining traction. Examples of this include increasing investment in healthcare property, which is relatively independent of economic conditions, and acquisitions of operator-managed properties with long leases (Graph 7).
- Despite minimal prospects of further yield compression in our opinion (Graph 12), many investors continue to see upside potential. Private-equity funds made net investments totalling almost €1bn during the first six months of the year (Graph 6). Their investments focused on office properties since these offer good potential for rent driven capital growth (see ”Market in Minutes Germany office markets Q2 2018”).
- Even if intensifying trade conflicts pose a risk to the export-oriented German economy, this is unlikely to impact the German investment market at least for the remainder of this year. The overall investment volume for the year is expected to total as much as €55bn.