CPN - March 2009 - (Page 22) INDUSTRY PULSE GERMANY nancing up to a certain deal size is available.” He pegged that amount at about 50 million euros while noting that exceptions exist. One could get more for a stabilized, income-producing residential property in Hamburg, for example. Another positive is that the German bond market is showing signs of a comeback, he said. For the most part, investors in Germany are pursuing safety rather than yield. Core Class A buildings in the top five markets are the favored office properties. Those assets still command cap rates of 5 to 5.5 percent from buyers, typically institutional investors like pension funds and open-ended funds. As a value-add office buyer, Behringer Harvard represents something of a departure, but those looking for such opportunistic buys may also find deals, Fortmann said. Declining office asset pricing in A-minus and B locations will create some good values over the next several years, he affirmed. Many of these bargains will result from refinancing issues similar to those in the United States. In each of the next three years, commercial real estate loans valued at 10 billion to 15 billion euros will come up for refinancing, Lemli estimated. “There will be buying opportunities as banks put pressure on owners. Some owners will try to sell rather than refinance.” SECTOR POSSIBILITIES Still, as in the United States, such generalities do not tell the whole story, as the economic slowdown is affecting Germany’s property sectors to varying degrees. As recently as the third quarter of 2008, the nation’s top five office markets averaged a remarkable 15 percent year-over-year increase in leasing volume, amounting to more than 22.6 million square feet of leasing activity, according to NAI Global. But while the German office market tends to be stable, it is hardly recession proof, and that volume of leasing is probably unsustainable.The five biggest markets will add a collective 12.9 million square feet of new office inventory this year, 30 percent more than in 2008. At the same time, tenant demand will likely flatten or decline. As a result, NAI predicts that office rents in the five major German cities will not rise above the current average of 349 euros per square meter, which now equals $41 per square foot. In Germany’s distribution market, some leading United Statesbased players are scoring major wins. During the fourth quarter alone, ProLogis leased more than 1 million square feet, highlighted by a 430,556-square-foot lease in the Rhine region’s ProLogis Park Hunxe to Logistics Group International GmbH, reported Christian Bischoff, ProLogis managing director for Northern Europe.The company expects demand for efficient, newly built distribution space to continue as tenants cut costs and restructure their supply chains, he added. However, such successes may become more challenging. A nationwide slowdown in production and distribution is expected to translate into a falloff in warehouse development and significantly lower leasing volume, which dropped 7 percent to 38.8 million square feet last year, according to Jones Lang LaSalle. Though tenants in the big five markets took down 10 percent more space in 2008 than they did in 2007, that increase fell short of making up for the 16 percent decline in warehouse leasing outside those markets. The secondary distribution markets will probably take the hardest hit again this year as national leasing volume declines 10 to 20 percent. Bischoff reported that his firm is responding accordingly, halting new development starts for the near term and focusing on its core business of owning and managing assets. —Reach industrial editor Paul Rosta at paul.rosta@nielsen.com. Free, Is the Sky Falling on Commercial & On-Demand Multi-Housing Property Developers? Webcast Get an In-Depth Look at the Federal Bailout Plan & How It Impacts Your Business The U.S. financial market is enduring one of the worst crises in its history. The investment banking model as we know it is effectively gone, and many commercial banks are spiraling downward, as well. Join Commercial Property News, Multi-Housing News and Contract for this on-demand Web seminar and hear from leading economists how the current financial bailout strategy will impact your business. Attend this online-only event, and learn how to protect your investments and navigate through this challenging environment. Presented by Presenting Economists: Sponsored by Sam Chandan Ph.D. Chief Economist, Reis Inc. Jon Southard Richard Green Director of the USC Lusk Principal Director of Forecasting, CBRE Torto Wheaton Research Center for Real Estate To register for this FREE Webcast, go to www.cpnonline.com/economicwebcast 22 COMMERCIAL PROPERTY NEWS • March 2009 • www.cpnonline.com http://www.cpnonline.com/economicwebcast http://www.cpnonline.com/economicwebcast http://www.cpnonline.com
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