Being a reliable investment was good in the crisis, but investors in German property are now focused on the challenge of increasing returns
Wundrak and his team are in the process of launching a fund focused primarily on German retail warehousing and another chiefly on Austrian retail and offices. These complement various other products focused on Germany and Austria, as well as a pan-European fund.
Prices of much secondary property in Germany already jumped as the economy rebounded and buyers who were priced out of prime markets entered.
Wundrak says it is important to buy high-quality secondary property "with a definite asset management angle to it. For secondary property, you need experience." But he cautions that a key issue facing his industry in future will be the ability of European banks to lend.
Although some estimates put the property funding gap in Germany at only €4.5bn - about one-tenth that of Spain, for example - Wundrak says: "German banks' exposure to southern Europe will hold many back in terms of lending, and many will lend only on prime property.
"If a manager wants to go up the risk curve, they may find it difficult to find bank finance, and finding it will only become more difficult."
Habib says borrowing from Polish banks - as First Property does for investments there - can be easier than from banks in Western Europe because "Polish banks did not get into sub-prime mortgages; they had a simpler model."
First Property has invested in Polish commercial property since 2005 and is currently raising money for a Polish property fund. Habib notes Poland benefits from substantial cross-border trade with its western neighbour.
"But Poland is coming from a lower base. It will grow faster than Germany over the medium term," he says.
Habib adds that prime Warsaw real estate still yields 6.75%. "In Poland, we have been able to buy more core properties. In 2005, it was very cheap to buy. Prime property traded at yields of 5% to 5.5%, and you could buy in Poland at up to 7.5%. Rents were about one-third of what they were in the UK, but we had much higher yields."
The income-focused First Property group has not sold any of the combined €300m Polish property it bought since 2005 and, of 300 tenants, only two became delinquent since 2007.
"Countries on the periphery of Europe that are not fiscally challenged are better countries to invest in," Habib adds. He selected Poland from a list of five to expand into as UK property - First Property's other focus - reached "bubble prices again".
Polish government debt as a proportion of GDP is about 53%, and the budget deficit about 7% of GDP. Habib says: "You have to find jurisdictions where there is growth. A bit of inflation with real GDP growth is the ideal situation. Generally in Poland, leases are subject to inflationary increases in rent, so every January your rent goes up by 3% at the moment.
"The political experiment of European expansion into Eastern Europe has been a massive fillip for central and Eastern European countries. The EU has committed €67bn for infrastructure spending. That gets delivered by 2013. When you compare this with €300bn GDP, it is a lot of money flooding in, and there is lots of foreign direct investment as well."
Wundrak says interest from international buyers has added interest in German retail property. Prices have risen as the foreign buyers, who were focused on Spain and the UK, are attracted to Germany by its economic growth and the effect on consumer spending.
Another area - German residential property - benefits from low volatility, according to DTZ's head of multi-manager Wendy Arntsen. The sector neither rose in real terms over ten years - "completely different to the UK and Paris and Spain" - nor fell during the crisis.
In Germany, about 40% of people own homes and the rest rent. Some German residential is pure housing, some is mixed with commercial use such as offices. Arntsen says: "This is a good opportunity for rental growth, and Germany's GDP growth gives opportunities for rental reviews."