Germany occupies a leading position among European countries in the influx of foreign investment into the commercial sector. Buying commercial real estate in Germany is popular with private and institutional investors from around the world, but over the past few years, demand has steadily outstripped supply.
Evgenia Kulikova, CEO of INTECO Real Estate
shares her opinion and answers the most important questions about buying commercial properties in Germany:
What determines Germany’s key success for foreign investment?
An increased interest in investing in commercial real estate and a ready-made business in Germany is favored by a transparent and stable economy, tax system loyalty and reliable investment protection by German law, before which, very importantly, foreign investors have equal rights with German citizens.
Could you indicate the most common types of commercial offers?
Real estate in Germany in the commercial sector is represented in large numbers and covers a wide segment of ready-made investment offers: retail stores, supermarkets, shopping centers, hotels, technical centers and office buildings. The list of liquid objects is made up by apartment buildings and investment and construction projects, the prospects of which are determined by rising prices for residential real estate in Germany, with an average increase of 7-8% per year.
What kind of commercial properties are foreign buyers interested to buy?
The investment point of private investors and institutional organizations is often closely focused on the acquisition of existing retail, along with hotels in large German cities, as the most advantageous offers with stable profitability and minimal risks.
What is the advantage of a supermarket as an investment object?
Large chain supermarkets are reliable tenants and an integral part of any city. Economic disasters and seasonal downturns are not reflected in their money turnover; the population is steadily purchasing the necessary everyday goods and household chemicals. If, according to recent statistics, 50% of Germans buy goods such as books, household appliances, clothes and children’s toys on the Internet, then in the food segment, this figure does not exceed 1%. This means that there is no reason for concern, that the turnover of the supermarket may decrease and it will be unprofitable for it to extend the lease.
What is the average price of grocery retail?
The cost of a supermarket as an investment product ranges from 1.4 million to 11 million Euros and depends primarily on location. Profitability can bring an investor a profit of 6 to 10% per annum.
Where is it more profitable to buy a supermarket, in a large city or in a small village?
This question depends on the priority and budget of the investor. In developed cities with a population of 5.000 to 20.000 residents, inexpensive supermarkets can be profitably purchased. Supermarkets, as a rule, are rented by the leaders of German retail and are characterized by a long lease. Such offers are a reliable investment, as they provide the whole city with groceries and essentials.
In large German cities with a population of 200.000 or more, the cost of an identical offer will be approximately twice as expensive. In key German cities such as Berlin, Munich, Dusseldorf, commercial offers like supermarkets are presented in limited quantities and are exclusive offers, despite a low rate of return of 3-4%.
What, first of all, are foreign investors paying attention to?
When choosing a commercial property, customers who are just starting to invest in commerce in Germany are guided by different strategies. Many are interested exclusively in the return on investment product, other investors highly value the location as the most important factor for the success of the investment and willingly purchase offers with low profitability, knowing that against the background of a general increase in property prices, the object will rise in price due to its location.
What would you advise to investors who are considering Germany for investment?
Based on our experience, we can say that the high prosperity of the German population allows profitable investment in any region without risk. The main criterion that should be followed when choosing commercial offers is how much the population needs the object, what benefits it brings.
When buying a supermarket, you should pay attention to another important factor. By acquiring a supermarket in Germany, you simultaneously become the owner of the land on which the commercial property is located, which undoubtedly provides the most important advantages and prospects.
If a supermarket is sold with a land reserve, where you can build new additional commercial space or allow the tenant to expand, this is a very advantageous offer with potential, that is worth paying attention to. In the case of the implementation of the land reserve, we can talk about increasing the profitability of rental property by 1.5-2 times.
Our portfolio contains interesting options for inexpensive supermarkets with reserve land, however, many objects are in our closed catalog. It is enough to send us an e-mail or to fill in a contact form and we will send our offers to the investor.
How much time is required for the construction of new retail space, if there is interest in realizing the land potential?
Construction of retail space lasts an average of 6 to 8 months. The big advantage is that developers in Germany give a 5-year guarantee on the quality of construction and eliminate any construction defects at their own expense.
After the wear and tear of the building, the owner has the right to rely on a permit for new construction.
What services do you offer for the acquisition of commercial properties?
We provide comprehensive services and always represent the interests of our customers in the German market. We carry out the selection of exclusive properties, check the full documentation, provide assistance in bank financing, provide after-sales service and management of residential and commercial real estate.
By contacting INTECO Real Estate and making sure the competence and professional approach of our specialists, customers use after-sales services that satisfy all possible needs when buying commercial or residential real estate.
In our portfolio, along with supermarkets, there are exclusive hotels, shopping centers and office buildings in Berlin, Munich, Dusseldorf, Frankfurt and Cologne; investment construction projects with a building permit; apartment buildings and apartment blocks in new buildings. We can offer foreign investors a wide selection of any investment objects.