The private equity firm Blackstone has become the latest investment house to shift its money from Germany’s housing market to the country’s commercial sector.
The New York-based Blackstone Group was one of the first multi-nationals to cash in on Germany’s post-recession housing market. That sector is now maturing and, like its pension and insurance fund rivals, Blackstone has turned its attention to commercial property with the acquisition in December of three German warehouses for around €100m [£82.9m] from the trouble-hit Credit Suisse mutual fund, CS Euroreal.
Private-equity firms accounted for three per cent of the €30bn [£24bn] investors paid for German commercial real estate in 2013, with analysts confident that will climb to at least 10 per cent this year. Demand for offices, warehouses and retail units is also rising in anticipation of new properties becoming available as banks and cash-strapped owners sell distressed assets.
Blackstone has been investing in Europe for almost two decades. In 2012, with the financial crisis easing, it founded LogiCor, a European warehouse owner and operator. And last year it raised $13.3bn [£8bn] to launch one of the world’s the biggest opportunistic property funds.
As part of that strategy, Blackstone recently confirmed it wants to double its European warehouse holdings within two years. “The company has been slow to enter the German logistics market because prices are higher than in other countries,” explained Jonathan Lurie, a London-based managing director in charge of Blackstone’s European property investments.
Yields for the best logistics properties in Germany’s six largest cities declined to an average of about 6.6 per cent by the end of 2013, down from 6.9 a year earlier. But lower yields indicate that prices are increasing, said Lurie. “The market has of course increased in value, but there remain opportunities to invest in properties where further work is required on stabilising or improving occupancy,” he added.
An increased appetite for commercial deals is also a confidence vote for the strength of German economy, the largest in Europe. Just before Christmas the Bundesbank estimated the domestic economy would grow by 1.7 per cent this year and at least two per cent in 2015.
“Investors are more willing to take on commercial leasing risk than they were 12 or 18 months ago,” said Philipp Braschel, head of German investments at Benson Elliot. “The outlook on extending leases and on moderate rental growth is more positive than it has been for a long time.”
Last year Benson Elliot — which has already started to divest itself of its residential investments — purchased the Turmcenter, a Frankfurt office block, from the state-owned lender Landesbank Baden-Wuerttemberg. In July it sold off 360 Berlin apartments.
As German house prices rose for the fifth successive year during 2013, Blackstone joined other private equity investors selling off their housing assets. Last year its share of residential property investments declined to about six per cent of the total, from 13 per cent in 2012, and as much as 50 per cent in the years leading up to the recession.
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