The Pfandbrief 2011 | 2012

Driven by such healthy fundamentals, demand for retail premises in prime locations by, above
all, successful international textile chains has been consistently high in recent years. Moreover,
these retailers will continue to pursue their expansion objectives. Germany offers a wide range
of opportunities for expansion thanks to the enlarged downtown locations, an abundance of
attractive shopping centers and the country’s decentralized settlement pattern.
The short supply of highly sought-after A1 downtown locations and the persistently strong
demand for such premises leads to steady – or even a slight increase in – prime rents. Outside
of such top locations, however, it is relatively difficult to re-let or to lower the vacancy rate,
which puts pressure on rents. With new projects in the pipeline, the trend of downtown shopping
centers seems to be unbroken.
Already in 2010, safety-minded investor groups in particular were again focusing more
strongly on the German retail property market, and the volume of transactions involving retail
properties even exceeded that for offices. But investors are no longer concentrating exclusively
on absolute core properties; they are also looking for real estate in good locations and
with shorter lease terms or low vacancy levels. This positive trend is likely to continue in 2011,
which should lead to yields falling further in the short to medium term.
Hotels
The hotel sector is highly dependent on the general economic setting. For this reason, it suffered
a severe slump also in Germany during the financial and economic crisis. Particularly the
higher class hotel segment and airport hotels were negatively impacted, above all, by the fall
in foreign guest numbers and cutbacks in business travel. Nevertheless, it has to be stressed
that the decline in business was less pronounced for hotels in Germany than in other European
countries.
Due to the prevalence of small and medium-sized enterprises in Germany and the fact that
German trade and industry is firmly rooted in the eurozone, paired with the value added tax
decrease for the hotel sector from 19% to 7%, German hotels in 2010 benefited to an aboveaverage
extent from the economic upturn. Overall, more overnight stays were recorded than
at any time since German reunification. Above all, the number of foreign guests and business
travelers rose again perceptibly. Despite the increase in accommodation available, this had
a positive effect on bed occupancy rates, which rose by 5.8% for Germany as a whole. This
upbeat development was observed for both the average room rate (ARR) and the average revenue
per available room (RevPAR). The ARR was up by 12.6 % and the RevPAR by 19.1%; with
that, the RevPAR was well above the average for Europe (+9.9%).
This positive trend attracted investors back to the German hotel market, especially in the
fourth quarter of 2010. Compared with 2009, the transaction volume in 2010 almost doubled,
with capital-strong investors and self users predominating. Foreign investors accounted for
roughly 50% of investment activity.
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