Brexit and Trump jitters to boost German real estate allocations
Political uncertainties stemming from Brexit and the new US presidency will continue to boost allocations to core Eurozone, with Germany likely to take further market share in 2017, according to Fidelity International.
As investors look to allocate to less riskier markets, Fidelity predicts that even more capital will be diverted to core Eurozone with Germany being the standout winner.
In the second half of 2016, Germany overtook the UK as the largest European investment market, growing its market share to 25.7%, significantly above the long term trend of 18.8%.
Fidelity expects this trend to continue with Germany set to gain further market share of capital allocations, maintaining a ‘new norm’ of 25-30% of European investment activity over the medium term.
Iryna Pylypchuk, senior European real estate analyst at Fidelity International, said: “Last year will go down in history as the year of major political change which brought unexpectedly high volatility to financial and currency markets. The implications quickly bled into the real estate markets with investors shifting preferences to the safe haven markets.
“Core Eurozone has benefited, but Germany is taking a centre stage. Underpinned by relatively strong economic and real estate fundamentals, coupled with its large and polycentric nature, the case for Germany has become even more compelling. This is particularly pertinent given the current level of uncertainty.
“Over the past decade German market has expanded significantly beyond the predominantly office-focused investment scene. Its commercial real estate investable universe is now significantly larger: industrial and logistics sector is a fully established institutional asset class and there is the rise of several ‘niche sectors’, such as retail parks, DIY markets, supermarkets, hotels and healthcare. This should, to some extent, ease the supply dilemma as the new capital pours into the market.”