German retail property remains in immensely high demand. However, with isolated exceptions, investors are focused on core and, potentially, core-plus real estate. Value-add properties, on the other hand, are at best considered as additions to a portfolio. Meanwhile, sought-after core properties are effectively out of stock. Owners of such assets are very rarely willing to part with them owing to the lack of reinvestment opportunities and development projects are also very scarce.
The shopping centre landscape is as follows. Of the around 30 properties either in the process of or pending sale, only two can be classified in the core segment.
This extreme scarcity is resulting in continued initial yield compression on core properties. In the non-core segment, however, investors have largely reached the limits of what they are willing to pay and risk premiums are no longer falling.
Source : Savills