While we are by no means out of the woods, as we look towards MIPIM 2023, I’m feeling more positive about the outlook for the German real estate market than I thought I would have a few months ago. Specifically, I currently see three great opportunities for real estate players who already are, or want to become, active in Europe’s largest economy this year.

Asset management

As my colleague Matthias Pink recently wrote in his outlook article, investors willing to move up the risk curve and those for whom real estate is an investment that needs to be actively managed are likely to get their money's worth in Germany in 2023. We are already seeing an uptick in value-add investors looking at, and bidding on, assets currently in the market and I expect interest in this sector will remain strong this year.

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As EPC legislation deadlines loom, Europe risks the threat of stranded office assets: properties that will fail to meet future energy efficiency standards or market expectations, and as a result are increasingly likely to face early obsolescence. Germany is no exception to this. Therefore, as part of ‘manage to ESG’ strategies, value-add investors may look to geographies where there is a high proportion of non-compliant stock. German Arminius Group, for example, has recently launched a Manage-to-Sustainability Office fund aiming to seek out real estate opportunities with significant value-add potential in all three ESG scopes. So far, Arminius has identified 30 urban areas in Germany for potential investments, including in Hamburg and Cologne.

Limited supply

Despite office vacancy rates rising by 0.5 percentage points in 2022, we are still looking at very low figures as the German average vacancy rate currently stands at 4.8 per cent. As a result, prime rents rose by an average of 7 per cent last year, while median and average rents rose even more sharply by 11 per cent and 8 per cent, respectively.

Supply remains scarce in many sectors, including logistics and housing. This means we are still very much in a landlord market and investors can profit from secure and stable rental income, provided they hold the right asset in the right location.

Further information

Contact Marcus Lemli

Savills Investment