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Deutsche EuroShop - Annual Report 2006

History:

Property Market

Investors once again showed a great deal of interest in German shopping centers, department stores, retail parks and factory outlet centers. According to Jones Lang LaSalle, one of the world’s leading estate agents and property consultants, retail properties became the top revenue-generating asset class in the German property sector for the first time. With a transaction volume of €18.5 billion (2005: €6.5 billion), they relegated the traditional leader, office properties, to second place with €18.2 billion. As in the rest of Europe, unlisted investors were the most important group of buyers.

Higher prices, lower returns

High overall demand and relatively scarce supply, combined with higher prices, led to falling returns for shopping centers and the pressure on margins continues. At the end of 2006, the return generated by German shopping centers in prime locations as calculated by Jones Lang LaSalle was 4.95%.

Tenant demand focussed on spaces of up to 250 m2

According to a survey by Kemper’s, a real estate agent that specialises in retail properties, the retail spaces in most demand in the past year were those in the up to 250 m2 size class (56% share). Larger spaces were also in demand: Every fourth lease was for over 500 m2.

Investors aiming for diversification

A study carried out by economic research and forecasting institute Feri Rating & Research found that 77% of German institutional investors want to increase the share of real estate in their total assets over the next few years, thus continuing the trend of many years. The reasons quoted include greater diversification of the total investment portfolio, stable income and positive performances expectations. Furthermore, many investors currently regard the returns generated by real estate as more attractive than those achievable with fixed-income securities.




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