In a white paper on the real estate investment scene, Manuel Jahn indicates that well-known mutual and institutional funds plan to significantly increase their investment in retail real estate in the coming months. Above all else, the shopping center segment is forecasted to develop in a positive direction despite the current financial crisis. The outlook is particularly good for Germany, whose stable retail conditions make shopping centers a reliable investment.
Manuel Jahn, expert on investors and financers in GfK GeoMarketing's Real Estate Consulting division, argues that the current financial crisis has not negatively affected all sectors. Certain areas of the retail real estate sector actually offer opportunities for growth. This is especially true in the case of shopping centers, according to Jahn: "Amidst the tumultuous waters of the present crisis, owners, banks and tenants can look to one particular investment area that continues to chart a steady course: the German shopping center."
Manuel Jahn notes here that rental income and retail turnover have been growing by one to one-and-a-half percent in good shopping center portfolios. According to Jahn, the current theoretical fair values at six percent mean that investors can hold the course and wait for better times. However, Jahn issues a warning to bargain hunters: Because demand for core investments among financial groups is a top priority, the premium market continues to be characterized by scarcity. A price decline is not to be expected even despite the ongoing financial crisis.
The real estate expert argues that good shopping centers represent sustainable, reliable investments in this time of crisis, given their relatively affordable monthly rent of around 20-25/m² particularly in comparison to prime retail locations in city centers, which can cost hundreds of euros per square meter. This is true not only for the companies who operate out of these locations, but also for the financers and investors for whom these properties generate a continual stream of capital.
Jahn concludes that if certain location, concept and management criteria are met, shopping centers offer sustainable investment opportunities and reliable cash flows even amidst the currently plunging branch and market indices. He also issues a reminder regarding the cause of the current financial and real estate crisis: During the real estate boom, real estate objects with failing or outmoded concepts, poor location profiles or other problems were often inconspicuously "buried" in larger portfolios and then sold to inexperienced investors at inflated prices. To avoid repeating these mistakes, Jahn emphasizes the importance of arranging for a professional assessment of the relevant criteria that impact on the real value and future success of a given real estate object.
Manuel Jahn is particularly optimistic with regard to the outlook for German shopping centers: While Spanish, Polish and Turkish shoppers spend between 35 and 56 percent of their disposable income in retail venues during prosperous periods, the notoriously frugal German consumers devote only around 28 percent of their disposable income to retail expenditures. "While these once enthusiastic shoppers abroad are now forced to tighten their belts, German consumers have long since already done so, meaning that further cuts in spending among Germans are not likely." Additionally, the substantial government benefits enjoyed by Germans in contrast to many other European countries help to guard against a steep decline in consumption.
Source: GfK GeoMarketing