The investment analysis company Preqin reports that the importance of German to the European real estate market is growing rapidly. More specifically, it’s referring to what it calls the GSA group (Germany, Switzerland, Austria) have emerged as a powerful grouping, despite the lack of any formal political or economic grouping. The language and the borders they share, as well as a wealthy investor base with deep markets of their own, mean that the GSA’s impact on the market will grow at a time when Brexit has shaken the position of London. The U.K. capital’s position as a safe harbor may return at some point, but complicated negotiations over its future have made its real estate fundamentals quite volatile. Preqin reports that 30 percent of all European real estate transactions are transacted in GSA, an enormous jump from just 15 percent in 2014. Of that total, it should be noted, 94 percent of all the deals in 2017 were driven by Germany. GSA markets are attractive not least because the yield gap (currently 3 percent separates German 10-year government bonds with prime offices yields in German cities).
But Preqin’s analysts argues that there’s more going on. “The relevance to real estate markets of GSA as a block is also seen in the strength and “common” behaviour of institutional investors based in the GSA,” it writes. “While in 2015 there were 403 GSA-based institutional investors in real estate, the number has increased by 38% since then, with these investors numbering 557 in 2018. Most of this growth has been in Germany, where the number of investors has increased by 101% since 2015. This relevance will continue to expand, as these investors continue to have significant inflows of capital, increasing their assets under management which in turn drives an increase in their allocations to real estate investments.”
