Since the European Central Bank began raising interest rates in 2022, there has been no change in private investment in real estate, while other groups of investors have withdrawn significantly, according to an analysis by the consulting company JLL. In fact, the share of the wealthy in total transaction volume has increased fivefold to about 10% of total transaction volume in the first six months of 2024.
Purchases by wealthy private investors include offices that have been hit by the double whammy of post-pandemic telecommuting trends and higher interest rates. In Hannover, for example, JLL brokered a deal for 70 mln. EUR for the sale of the former headquarters of Deutsche Hypothekenbank - the mortgage arm of state-owned regional lender NordLB - to the family office of Carl Gerhold, founder of Hanover-based energy company Getec Group.
In 2023 office properties accounted for almost a third of property investments made by private buyers, while the share of office transactions in the wider German market fell to 17%. According to Stefan Laimbach, head of office investment at JLL in Germany, large investors remain cautious about investing in office space.
„Private money is now easier than institutional money and they are willing to pay attractive prices. A deal for an office worth about 70 mln. EUR in a city like Hannover – who would have thought this would be possible in 2024?”, Laimbach said.
Besides offices, another favorite of private investors are iconic buildings and locations. In March, Union Investment sold Fünf Höfe in Munich, which houses a luxury shopping center as well as offices and apartments, to the family office of German healthcare billionaires Andreas and Thomas Strüngmann. A complex near the city's iconic Frauenkirche church was sold for €700 million. EUR, making it one of the biggest commercial property deals in Germany this year.
According to Henning Koch, CEO of asset manager Commerz Real AG, trophy assets like Fünf Höfe, as well as the lack of serious competition, attract private investors who have withdrawn from the market when other buyers have were most active.
„All these investors generally do not want to engage in protracted bidding and price wars, but rather value confidential, exclusive access,”, he said.
Earlier this year, Commerz Real bought several mixed-use commercial properties in Munich for an unnamed private investor. The assets became available as part of the turmoil that has hit the sector since the previous owner, Düsseldorf developer Centrum Holding, filed for bankruptcy in mid-2023.
Some of the buildings sold for an undisclosed sum are located on Maximilianstrasse, Munich's luxury shopping boulevard, and are home to luxury brands such as Fendi and Montblanc.
„Private investors are now taking advantage of this rare opportunity to acquire properties that would normally remain unsold,” Koch said.
You can see detailed statistics on average property prices in Bulgaria by cities and neighborhoods HERE