All players in the German real estate investment market have now had to adapt to the new market conditions for a whole year. The number and structure of active market participants has also changed since the outbreak of the pandemic. Between April 2020 and March 2021, there were 576 different active purchasers in the commercial investment market. This is almost 100 fewer than in the boom year of 2019, which saw 669 active players. While nine of the 20 most active purchasers by investment volume in 2019 came from Germany, the equivalent figure for the last twelve months was 13.

Hence, the market share of domestic investors has risen significantly. German purchasers accounted for more than 70% of the transaction volume in the commercial investment market in the first quarter of 2021. This is the highest figure since 2009 (80%), which was the last crisis year. However, the reasons for the high proportion of German purchasers are different this time. Foreign investors with no local offices or partners have been thwarted by the travel restrictions over the last year. In previous years, their market share has been consistently around 50%. From April 2020, this proportion began to continually decline and stood at just 28% in the first quarter of 2021. Nevertheless, as the pandemic situation normalises, we will see a stronger return of foreign players since, more than ever, Germany is regarded as a safe haven among many international investors.

On the whole, there remains a large volume of capital seeking investment opportunities. The real estate sector is impossible to overlook for many investors in view of the yields still achievable (see also: How are initial yields trending?). The flood of capital appears to be particularly concentrating on a specific type of investment vehicle, namely open-ended special funds. These vehicles enable investors both from Germany and abroad to enter the real estate market without being experts in real estate investment or expending their own resources. The number of special funds has risen consistently in recent years. In addition, capital investment companies now offer an increasing number of specialised and themed funds, e.g., for the logistics, care property or supermarket segments. Open-ended special funds were responsible for around a third of overall investment volume over the last twelve months, which is higher than ever before. They also had by far the largest net acquisition volume of all investor types over the period, with net investment totalling €9.5bn.

Trailing way behind, both in terms of acquisition volume and net investment, were insurance companies and pension funds as well as property companies and REITs. Both groups were also among the net purchasers over the last twelve months, each accounting for net investment of approximately €2bn. Hence, the net investment of both groups over the last twelve months was higher than the five-year average. Since there is a large volume of capital commitments for funds, particularly for core product but also for other risk categories, we expect open-ended special funds to remain net purchasers going forward. The same is true of the two other groups, insurance companies and pension funds and property companies and REITs, which also have large amounts of capital and will remain net purchasers in their annual investment activity.

Vendors of commercial property over the last 12 months typically belonged to three groups of market participants. Builders / developers and corporates (owner-occupiers) are two of these groups that have consistently been net vendors in recent years. The other group, somewhat surprisingly, is asset managers, who have made net disposals totalling almost €8.5bn since April 2020. These are normally among the net purchasers in the German real estate market, albeit they have always shown both high acquisition and disposal volumes in recent years. There are two possible factors that may have particularly caused the lower acquisition volume. On the one hand, there was a lower supply of suitable product over the last twelve months. On the other hand, asset managers are likely to have dedicated themselves largely to managing their existing portfolios over the last twelve months in order to deal with issues such as rent deferrals or lease renewals, leaving fewer resources for acquisitions. With the increasing normalisation of the markets, however, these groups are likely to be once again more active on the purchaser side going forward.