Activity in the German commercial property investment market remained at a low level in the first half of 2024 according to Savills. Transaction volumes totalled approx. €10.7bn across 450 completed transactions, both of these figures being broadly in line with the corresponding period last year.

Savills believes that a significant leap in investment activity is only likely if many investors are able to secure liquidity via disposals. This would increase supply so sharply that prices would fall further. This growing supply would be met with an abundance of available capital on the demand side, which has been frustrated to date owing to excessive yield requirements. How likely such a scenario is remains to be seen.

Marcus Lemli, CEO Germany and Head of Investment Europe at Savills, says: “There are a few points that we believe suggest that we will see at least a gradual increase in investment volumes during the second half of the year. Firstly, the number of sales processes starting or being prepared has increased in recent months.

“Secondly, prime yields stabilised during the first half of the year, softening only marginally and selectively in both the first and second quarters. This could mitigate the concerns of many potential purchasers around buying too early and hence at too high a price. Thirdly, book values rather than transaction prices are likely to have fallen further, meaning that the two figures are now closer together. This will facilitate disposals for investors who are anchored to the book value, such as open-ended retail funds.”

Matthias Pink, Head of Research Germany for Savills, says: “In our opinion, initial yields have now fully priced in the interest rate rises and further shifts in yields will be primarily determined by changes in supply and demand in the investment market, as well as fundamental changes in the leasing markets. In sectors with improving fundamentals and/or rising investor demand, yields could harden further in the medium term. We believe particular candidates for this are niche sectors such as managed residential accommodation or data centres. Overall, however, we expect initial yields to remain stable over the next one to two years.”

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