Investment in commercial real estate in Germany: income is not always the most important
German real estate continues to attract investors from around the world due to the stability of the local economy and the reliability of the market. What objects are most interesting for investments, says the head of Fuchs Real Estate.
Julia Fuchs, head of Fuchs Real Estate, recommends paying attention to the commercial sector and calls her “ideal object” in Germany.
– Julia, from the outside it may seem that in Germany you can invest in real estate of almost any type – of course, if you approach the issue with knowledge. Is this a fallacy or not?
– Of course, in Germany, both those who invest in residential properties and those who invest in commercial ones can succeed. But it is impossible to do everything. First of all, we specialize in commercial real estate, but we are also successfully developing the sale of private housing in Germany.
Our company is focused on working with commercial real estate, and most of all – with the retail sector. Sometimes we search for objects to order in other segments, we can pick up an apartment or office space, but our focus is on stores and shopping centers. More than 70% of investment projects that we have implemented are associated with retail facilities.
– Why exactly in this segment do you see the greatest financial prospects?
– Retail property is really interesting for investors. Partly because it is more understandable to them. For example, warehouse real estate requires special competence from the one who invests money. We are skeptical of hotels in general: you can buy a hotel only if a large global network works with it, and such facilities are not cheap.
Our client is an investor ready to invest € 2-3 million in an object, sometimes more, sometimes less.
For him, the most clear and profitable solution is supermarkets. They are relatively easy to manage, with the purchase it is not difficult to get bank financing – if you need it. And, not least, it is easier for an investor to understand the structure of this business.
– Do you think the customer needs to understand the process? After all, he himself, most likely, will not directly manage the business.
– Of course, an understanding of the process is especially important in the absence of a reliable partner managing the acquired object, someone who not only knows and understands the subtleties of such a business in Germany, but also provides all the necessary interactions, helping the new owner to avoid wasting time, nerves and money. In general, with a qualified management, a detailed understanding of the business structure is not necessary. Rather, it is important to understand the characteristics of the real estate market in Germany.
You are right in the sense that by investing, our client receives passive income. And I have repeatedly been convinced that the best partners in the long term are those investors who have at least some experience, even if not in Germany. As a rule, these are people who feel the process, know what passive income is, and really appreciate the market opportunities. This not only makes them successful, it forms a healthy long-term business relationship with them.
– “Really evaluating market opportunities” – what do you mean by this?
– Anyone who considers real estate in Germany as a place to preserve capital should understand that eight, and even more than ten percent a year, is not available here. We live in a conservative country, and it is a conservative country that gives stability, which is so valued by a certain circle of investors. For them, investing in Germany is their future, it is their confidence in the future. In the absence of stability, which determines a sustainable business, the opposite is often the case: the higher the income, the worse.
– You said that the yield of 8-10% today is unreal. And what is real?
– I would say that the solid figure is 6% before taxes. It should be noted here that taxation for non-residents can be minimized to zero. But that’s another topic. Just supermarkets and can bring a similar income. Naturally, these figures can not be extrapolated to the whole of Germany. For example, it is clear that in Munich, even close to this yield can not be obtained.
Examples of commercial real estate
– What object can bring the maximum numbers?
– Ideal – a supermarket for € 2.5-3.0 million in a city with a population of more than 5 thousand inhabitants. The tenant is a well-known network that entered into a new lease or made it one or two years ago. As a rule, these are long-term contracts – 10-15 years with the prescribed possibility of prolongation. That is, it is easy to calculate that throughout this period you receive a guaranteed passive income and return your investment.
– In which region may be the most attractive investment supermarket?
– We recommend objects in Bavaria, in Baden-Württemberg and in Hesse. The first two federal states are the most powerful and financially strong. In Hesse and Bavaria, we have achieved impressive results for our customers.