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2017 | Buch

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Understanding German Real Estate Markets

herausgegeben von: Tobias Just, Wolfgang Maennig

Verlag: Springer International Publishing

Buchreihe : Management for Professionals

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

In this book, experts discuss how German real estate values have remained stable throughout the financial crisis, even though transaction volumes have been very volatile since 2005. Consequently, risk-averse national and international investors have started to invest in virtually all German real estate asset classes. This book tries to answer what has made the German real estate markets more resilient to shocks than many European real estate markets by analyzing the economic, regulatory and demographic environment. In 30 well-structured chapters, experts from both the academic and professional world analyze structural and current issues of German real estate markets. Readers will get a deep understanding of what makes the German real estate market special and where potential opportunities and threats in Europe’s largest real estate market exist.

Inhaltsverzeichnis

Frontmatter

Macro Environment

Frontmatter

Real Estate Data Sources in Germany

Abstract

Market information is essential for rational property investment decisions. This chapter outlines the range of available data on the property market provided by official sources as well as private enterprises. Data on prices and rents in Germany not only captures different segments of the market but also relies on different calculation methods. Therefore, investors have to check price developments carefully. Fundamental market indicators like growth rate, employment development and demographic change are therefore important complements to price indicators.

Michael Voigtländer

Size and Impact of Real Estate Sector and Its Role for Business Cycles and Growth

Abstract

The real estate industry is one of the most important sectors of Germany. Its development and the development of real estate values are most important to Germany’s economic business cycle and the country’s long-term growth path. On average, Germany’s real estate activities and price trends have stagnated more or less since the mid-1990s until 2006 and thus deviated from the international pattern. The underlying structural differences include, amongst others, the demographic development, the characteristics of the German real estate finance system, the fiscal policy and a decade-long low and stable general inflation. In return, the real estate sector in Germany—particularly when compared to other countries—serves rather a stabilizing function, especially in periods of economic slowdowns.

Wolfgang Maennig

Demographic Outlook and the Implications for Real Estate Markets

Abstract

The fertility rate in Germany has been very low for 40 years, at more or less 1.4 children per woman. In the past, the resulting deficit of births could be offset partially with immigration. The population in Germany shrank by almost 800,000 between 2003 and 2010, and demographers expect the coming decades to bring more contractions and a marked ageing of society. However, in the last few years, the number of inhabitants has been rising, thanks to strong inward migration from southern and eastern Europe and particularly due to a strong inward migration of refugees. This chapter will outline the most important demographic trends for Germany, as well as the regional differences, in order to derive the most important implications for real estate markets.

Tobias Just

Germany’s Regional Structure

Abstract

Many foreign investors start looking at Germany from a macro perspective. However, Germany is not a monolithic real estate market, but consists of very different regions. Some of these differences can easily be tracked back to historical events and phases such as the division of Germany after World War II. In this chapter, the reader will learn more about the economic and social differences characterizing the German regions. Data is presented on current key economic indicators and on the development of some key indicators in the more recent past. The chapter highlights important potential drivers of future developments.

Tobias Just, Philipp Schäfer

The German City System

Abstract

The German city system with its essential structures, founded in the Middle Ages and further developed during the industrialization, features characteristics that are unique within Europe. Consisting of a polycentric network of cities ranging from 200,000 to 600,000 inhabitants that is supplemented by a concentration of small and medium-sized towns (<20,000 inhabitants) mainly in the West and Southwest, the German city system is interspersed with evenly distributed large cities that contribute to a functional polycentricity within Germany due to their differing economical specialization. Based on the assumption that in future cities can be regarded as privileged fields of innovation for knowledge and cultural production, the large and in particular the metropolitan areas like Berlin, Hamburg and Munich can be expected to show a considerable prospective growth owing to their highly diversified knowledge-economical functions. Furthermore, their functional competiveness and their central position within Europe allow the German cities to be well prepared for the competition amongst European cities and regions.

Guido Spars, Inès-Caroline Naismith

The Micro-Cosmos of German Cities: New Insights into the Supply of and Demand for Urban Amenities

Abstract

The value of location, arguably the most important determinant of real estate prices, is a composite of a broad range of characteristics such as access to labor markets, natural amenities like parks and waterfronts, urban amenities like restaurants and cultural facilities and the socio-economic characteristics of the resident population. To consumers searching for new living space, the cost of collecting relevant information on neighborhoods they are not familiar with is high. For developers, real estate agents and policy makers, the changing nature of consumer preferences for the various types of amenities are typically hard to observe, creating uncertainty as to where and how to best provide and promote desirable living space. The results are frictions like higher moving costs and reduced mobility, imperfect product differentiation and welfare losses. A new application, POTENTIALSPACES, aims at reducing these frictions by developing (a) micro-geographic indices that capture the endowment with such amenities covering the whole of Germany, (b) a web interface to search for a preferred combination of amenities, and (c) a real-time monitoring system of the demand for amenities. Using POTENTIALSPACES as an example, this article introduces the theoretical underpinnings and practical applications of “big data” in the realm of real estate.

Gabriel M. Ahlfeldt, Nicolai Wendland

Sustainable Buildings

Abstract

The construction and real estate sectors are in a state of change: Energy efficiency, resource protection, residential and workplace health, value retention and risk mitigation are now in focus. General conditions and market interests are changing. Therefore, in the future buildings will be planned, built and operated differently, i.e. more sustainably than in the past. Sustainable building means to build intelligently: The focus is on a comprehensive quality concept that serves the building and real estate sectors, as well as society in general. Sustainable properties are beneficial to the environment, conserve resources, comfortable and healthy for their users, and fit optimally into their socio-cultural surroundings. This article is an introduction to the German Sustainable Building Council’s quality label (DGNB), which supports planners and construction firms in the realization of sustainable buildings. The DGNB certificate assesses the building’s overall performance, not individual actions. Along with pre-certification, the DGNB criteria can be used to identify efficient, inexpensive steps during the planning phase. Furthermore, the DGNB pre-certificate gives investors the confidence during the early planning stage that the building’s performance targets will be reached when it is finished.

Christine Lemaitre

Judicial Framework

Frontmatter

Regulations and Laws on Real Estate Agents, Notaries, Cadastres and Rent Increases

Abstract

This chapter describes the system of cadastres and land registers as well as the characteristics of real estate brokerage and the system of notary publics in Germany and contrasts some of its aspects with the situation in other countries in Europe. In addition, the chapter explains the new legislation concerning the regulation of rents in Germany.

Michael Schick

Legal Framework for Real Estate Asset Classes

Abstract

Investments in real estate in Germany can be basically differentiated between direct and indirect investments. While the former will usually be structured as a straightforward single-object or portfolio transaction, the latter may take a variety of legal forms. Most important, German law offers stock corporations, G-REITs and real estate investment funds as potentially different legal forms for investments, which are analyzed in some detail below.

Clemens Just

Valuation of Real Estate in Germany

Abstract

When evaluating real estate in Germany, German valuation experts often apply the German valuation standards. These conform to international valuation practice in many—but not all—respects. In this chapter we will identify what is specific about German valuation standards and introduce the German valuation methods: sales comparison approach, income approach and cost approach. As data availability is the main challenge for each valuation, this chapter will also include information on where to find relevant market data.

Dietmar Meister, Kerstin Dressel

What Germany’s Amended Tenancy Laws Do and What They Don’t

Abstract

The latest amendments to Germany’s tenancy laws (Mietrechtsnovelle) have resulted in a number of fundamental changes to the rental housing market that both conflicts with practical realities and disadvantages landlords and apartment seekers alike.

Michael Schick

Commercial Leases

Abstract

This contribution describes the formal requirements for commercial lease contracts, the possibilities of rent reviews, lessor’s option for VAT, the special provisions for registered leases and the possibilities of diverging from certain legal regulations for lease contracts in the German Civil Code (“Bürgerliches Gesetzbuch—BGB”) esp. concerning operating costs, obligations for maintenance and repair/decorative repairs, security, subletting. Such diversions are restricted by the law on general terms and conditions of business.

Wolfgang Usinger

Planning and Building Law

Abstract

This article describes the urban land-use planning which comprises the preparatory land-use plan and the binding land-use plan, the content, the procedures, legal effects and the responsibility of the municipalities for the preparation of these plans, and the approvability of development projects. In addition, the article contains the requirements concerning the building permission and the building permission procedure.

Petra Lau

Tax and Subsidy Framework

Frontmatter

Tax Framework for Investing by Asset Classes

Abstract

There is no standard structure for foreign real estate investments in Germany. The different investment vehicles have various advantages and disadvantages for different investors. Obviously, tax consequences must also be taken into consideration when an investor considers the investment vehicle that fits his individual circumstances and special needs best.

Joachim Krämer

German Taxation of Inbound Real Estate Investments

Abstract

This chapter gives an overview of the main aspects of the German principles of taxation relevant for inbound German real estate investments by non-German corporate investors. As a rule, such investments are subject to German (corporate) income tax and solidarity surcharge. The tax structuring usually focuses on mitigating German trade tax and German real estate transfer tax. In the course of the transaction itself, German value added tax issues play a significant role.

Valentina Farle, Rainer Schmitt

Monument Protection and Zoning: Regulations and Public Support from an International Perspective

Abstract

This contribution outlines regulations regarding the protection of historical buildings, redevelopment law and preservation statutes and describes compensatory subsidies available in the form of tax benefits and/or grants. The article evaluates German regulations and public supports available for monument protection and modernization from an international perspective.

Wolfgang Maennig

Financing

Frontmatter

Commercial Property Financing

Abstract

Following the start of the financial crisis in 2007 capital markets worldwide were in shock. While initially only markets in the United States were affected, during the summer of 2007 the European securitization market, was also stricken. Even though there were no real estate bubbles in Germany compared to most European and US markets, it took more than 5 years until the market for commercial real estate finance recovered and reached pre-crisis volumes and terms in 2014. This chapter shows the differences between Mortgage Pfandbrief and securitization through the issuance of CMBS, analyses market developments during the last few years including the Loan Sales Market and provides a short introduction to real estate finance.

Frank Nickel

Going Public and M&A in the German Real Estate Market

Abstract

This chapter examines the German real estate market focusing on two main topics, the public market and the private M&A market. Initially an overview and the specific characteristics of the public real estate market are described, including requirements from an investor’s point of view regarding listed real estate companies. In addition, the process and prerequisites of becoming a listed company in Germany are specified. The second part focuses on the real estate M&A market in Germany. Following an overview of the market developments over the last years and the current environment an outline of a typical M&A process including relevant issues for real estate companies is described.

Klaus Elmendorff, Christian Schmitt

German Open-End Real Estate Funds

Abstract

Open-end Real Estate Funds (OEREFs) are the predominant type of securitized real estate investments Germany. This chapter explains the institutional and legal environment of this investment vehicle, which is designed to provide the risk-return benefits of private market real estate. We review the historical performance and portfolio composition of German OEREFs as well as possible reasons for their track record. A special emphasis is placed on the turbulences in the aftermath of the recent financial crisis and the legal changes that were undertaken to stabilize German OEREFs.

Steffen Sebastian, Till Strohsal, René-Ojas Woltering

German Closed-End Funds

Abstract

Closed-end funds investing in real estate play an important role in the asset allocation of wealthy private investors in Germany. The investors take shares in a private company, investing a relatively small amount of money in large individual properties. The following article describes the basic elements of closed-end funds, the market in Germany, the different players, with special emphasis on the impact of the new regulations by the German Capital Investment Act (Kapitalanlagegesetzbuch, KAGB) transposing the European Alternative Investment Funds Managers Directive (AIFMD) into German national law.

Helmut Knepel, Thorsten Voss

REOCs and REITs

Abstract

This chapter considers the German market for listed real estate companies. First, a distinction is made between German listed real estate operating companies and Real Estate Investment Trusts. These are then ordered into the investment spectrum, and the German and European market for listed real estate companies is analyzed. Finally, success factors and value drivers that can support the success and the future of German real estate companies on the capital market are presented.

Wolfgang Schäfers, Kai-Magnus Schulte, Alexander Scholz

Possible Applications of Derivatives

Abstract

There is a great instrument to diversify a real estate portfolio quickly and cost effectively: Derivatives on real estate indices! Furthermore, derivatives have a very important hedging function. The global financial crisis has underlined the importance of better risk management. Consequently, hedging and the targeted reduction in exposure will be more used. This can be achieved with derivatives on real estate indices. Real estate investors may use derivatives to expand or reduce the allocation in certain markets and sectors. For example, investors may reduce the share of the German retail sector in their portfolio while they increase the share of French office properties. These possibilities to scale the risk exposure will make real estate derivatives an important instrument in the toolbox of portfolio managers. The availability of standardized real estate derivatives through Eurex and of custom-made real estate derivatives on the OTC market enables institutions to fine tune their real estate commitments. Consequently, with all the potential advantages, one might conclude that in the near future it will have become as much a standard to use derivatives on real estate indices to hedge against market risks, as it is now standard to use derivatives on currencies to hedge against exchange rate risks.

Daniel Piazolo

Asset Classes

Frontmatter

Development of Residential Property

Abstract

The German residential market has been in the focus of numerous (opportunistic) international investors in the last decade. In their view the market was undervalued offering significant potential to benefit from rising prices and a rising home-ownership rate, as Germany’s was amongst the lowest in Europe. The actual development proved the business plans, based on these assumptions, by and large wrong. The investors missed out, that more or less stagnating prices and the low home-ownership rate are the result of the structural framework. A detailed analysis of the development of the demand and supply side reveals this, but also shows that institutional investors are only playing a subordinate role in the German housing market as private owners and investors dominate the market. As construction activity in the multi-family sector is recovering from its low, the importance of institutional investors is increasing, supporting the stable performance of the German residential sector already seen in the past.

Marcus Cieleback

German Office Markets

Abstract

Market activity on the German office property market focuses strongly on the seven prime markets Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg, Munich and Stuttgart. Relative to prime rents, the two markets Frankfurt and Munich are comparable and competitive within the global context. Vacancy rates in German markets differ substantially, reaching even 12 % in Frankfurt/Main. Berlin leads in terms of office stock and take-up and is now rapidly developing.

Andreas Schulten

Retail Property Markets

Abstract

Thanks to its relatively high purchasing power combined with nearly 81 million inhabitants Germany is the biggest retail market in Europe. Since the 1990s the dynamics of total sales were low; nevertheless the retail sales area continued to grow. Amid tough competition professional retailers and retail developments not least grew on new and modern sales space. But new planning law for large-scale retailing becomes more and more a bottleneck as planners nowadays often favor inner cities and other existing functioning retail locations. Since the pipeline for prime locations and leasable and investable objects is narrow, rents and property prices for these scarce projects are rising by trend whereas low-quality locations and objects show a more difficult performance. Focusing retail expansion on good micro-locations in well-established shopping cities makes even more sense today due to the significantly rising importance of e-commerce.

Olaf Petersen

Hotel Market Germany

Abstract

For some years, the German hotel market has become increasingly interesting to international investors who have come to appreciate its transparency, stability and diversity. Germany is also regarded as the most important European expansion target by international hotel chains and with this, offers an abundance of investment possibilities. Along with this and apart from the top locations and core investments, whose demand far exceeds its offerings, it is also important for market participants to become active in the segment of internationally little-known locations, the so-called “secondary cities”, that display a definitely positive growth outlook within the hotel industry. This chapter delivers the requisite know-how to be able to comprehensively understand the hotel market in Germany with its opportunities and risks as well as an understanding beyond its well-trodden hotel investment paths.

Martina Fidlschuster, Christine Mayer, Philipp Linder

“Unternehmensimmobilien”: An Asset Class of High Potential

Abstract

They provide companies of any type and sector with flexible floor plate for doing business, be it for administrative, storage, manufacturing or service purposes: “Unternehmensimmobilien”. This German term refers to a comparatively young asset class of multi-use and multi-let commercial real estate that a growing number of institutional investors now consider eligible for their portfolios. Reasons underlying the increased interest include enhanced market transparency and comparatively high and stable yields. Having outlined the typology of Unternehmensimmobilien, the essay moves on to discuss latest market trends for this asset class and associated asset management requirements.

Stephan Bone-Winkel

Ongoing Catch-Up Potential for German Real Estate Returns

Abstract

Germany has attracted substantial real estate investments from abroad within the last years. Furthermore, German investors have also invested again a higher percentage of their capital earmarked for real estate at home. Therefore it has to be examined whether the German real estate returns have justified the investments. The answer is twofold: Yes and No. Yes, investments in German property have earned higher returns compared to other countries in some years. No, looking at the average return for almost two decades, the German market has not turned out to be a good investment. Compared to returns in other markets, German returns have been low. Yet they have proven to be less volatile in comparison to other markets. Consequently, one can argue that there is less risk involved at an investment within Germany—relative to other real estate markets. However, the investor has to consider that the German market is very diverse across sectors and across regions. To judge and benefit from regional developments and opportunities, investors are well advised to research the local markets rigorously. Overall, there are good arguments for the view of still highly attractive German real estate markets—compared to other asset classes and compared to other countries.

Daniel Piazolo, Justus Vollrath

Public Real Estate

Frontmatter

Public Real Estate

Abstract

The broad range of real estate assets and their management in the public sector offers enormous scope for optimization. However, even after years of improvement, the challenges of real estate management in the public sector include insufficient data transparency, a lack of real estate objectives and strategies, inefficient organization and inadequate performance-related management methods and incentive systems. Optimization measures have been pursued at a national, federal state and local level towards professional Public Real Estate Management. Yet despite these efforts and many successes, there is still further re-structuring and building work to be done, particularly with regard to future societal development. Public Real Estate Management will have to meet the challenges of change with essential optimization strategies and early intervention. Evaluation and appropriate organizational optimization as well as active portfolio development will be at the heart of sustainable management. This article describes the situation, the future challenges and requirements of Public Real Estate Management.

Eleonore Pöll

PPP and Infrastructure

Abstract

This chapter examines the role of public private partnerships in the public procurement of public real estate and transportation infrastructure in Germany. Introductory, the general structure and characteristics of PPPs are explicated along with special remarks about specific features of the German PPP approach. This includes the specific role of the financing models applied, especially the role of non-recourse forfeiting of instalments in municipal projects. Further reference is made to the highly divided and complex approach of federal and federal states’ authorities to PPPs. Any federal state set up its very own taskforce that issues guidelines and provides support to municipalities in heterogeneous ways. Nevertheless, on project level, a certain degree of standardization led to different types of contract models in the public real estate sector that are applied consistently throughout Germany on any governmental level. Although, even standardized, models in the road infrastructure sector are applied only on federal level, whereas single projects on state and municipal level can still be considered ‘pilot projects’. Finally, the flow of deals in the public real estate and the road infrastructure sectors are summed up in tables that also feature updated figures for projects in tendering and under preparation.

Hans Wilhelm Alfen, Sven Barckhahn

Titel: Understanding German Real Estate Markets
herausgegeben von: Tobias Just
Wolfgang Maennig
Verlag: Springer International Publishing
Electronic ISBN: 978-3-319-32031-1
Print ISBN: 978-3-319-32030-4
DOI: https://doi.org/10.1007/978-3-319-32031-1