German Ultra-Rich Snap Up Trophy Real Estate Amid Market Downturn
Wealthy families are seizing the opportunity to buy iconic buildings and offices at discounted prices as institutional investors retreat from Germany's battered commercial real estate market.
GermanyReal EstateCommercial PropertyInvestmentWealthy FamiliesReal Estate NewsSep 03, 2024
The ultra-rich private investors have closed deals worth €1.5 billion ($1.7 billion) across all property classes in the first six months of this year in Germany. Since the European Central Bank began raising interest rates in 2022, the volume of private investments into real estate has remained constant, while other investor groups have visibly withdrawn.
That's meant that the wealthy's share of overall transactions has surged fivefold to about 10% of the total in the first six months of 2024. The buying spree has included offices, which have been hit with the double blow of post-pandemic remote working trends and higher interest rates.
In Hanover, JLL brokered a €70 million deal to sell the former headquarters of Deutsche Hypothekenbank — the mortgage unit of public sector regional lender NordLB — to the family office of Karl Gerhold, founder of Hanover-based energy company Getec Group.
In 2023, office properties accounted for almost a third of real estate investments made by private buyers, whereas the share of office transactions in the wider German market fell to 17%. Institutional buyers are still cautious about putting money into office space, according to Stephan Leimbach, JLL's head of office investment Germany.
Private money is currently finding it easier than institutional money and is prepared to pay attractive prices. An office transaction in the region of €70 million in a city like Hanover — who would have thought that's possible in 2024?
Iconic buildings and locations are another portfolio favorite of private investors. In March, Union Investment sold Munich's Fünf Höfe, which houses an upscale shopping mall as well as offices and apartments, to the family office of German health-care billionaires Andreas and Thomas Strüngmann.
The complex near the city's iconic Frauenkirche sold for €700 million, making it one of the largest German commercial real estate deals so far this year. Trophy assets like Fünf Höfe as well as a lack of serious competition are luring back private investors who had withdrawn from the market when other buyers were most active.
Earlier this year, Commerz Real bought several mixed-use commercial properties in Munich for an unnamed private investor. The assets were made available as part of the turmoil affecting the sector, as the previous owner — Düsseldorf-based developer Centrum Holding — had filed for insolvency in mid-2023.
Some of the buildings, which sold for an undisclosed sum, are located on Maximilianstrasse, Munich's high-end shopping boulevard, and house stores of luxury brands like Fendi and Montblanc.
Frequently Asked Questions
What is happening in the German commercial real estate market?
Wealthy families are snapping up trophy assets at discounted prices as institutional investors retreat from the market.
How much have private investors spent on real estate in Germany this year?
€1.5 billion ($1.7 billion) across all property classes in the first six months of this year.
What types of properties are private investors buying?
Offices, iconic buildings, and locations, including mixed-use commercial properties.
Why are private investors able to buy these properties at discounted prices?
Institutional buyers are cautious about putting money into office space, and there is a lack of serious competition.
What is the significance of the €700 million sale of Munich's Fünf Höfe?
It is one of the largest German commercial real estate deals so far this year and a sign of the growing interest of private investors in trophy assets.
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