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Untapped Potential in German Listed Real Estate Markets

06/20/2011 | By Matthew Bechard

Philip Charls, CEO of the European Public Real Estate Association (EPRA), spoke with REIT.com during REITWeek 2011: NAREIT's Investor Forum about the publicly listed European commercial real estate market. The last time Charls spoke with REIT.com, the market was in the midst of recovering from the global economic recession. That has changed, as many regions are now focused on growth, he said.

One of the regions that has the most room to grow is Germany, Charls said, adding that only about 1.5 percent of all German commercial real estate is held by listed companies.

"We see a lot of push from investors who would like to have access to the biggest and most successful European market, which Germany is," Charls said, adding that liquid access to that market is in high demand. In the last couple of months, Charls said progress has been made in new German REITs coming public or making plans to do so.

Charls said other interesting markets with potential for growth include Spain, where the large amount of distressed assets will likely come to the market in the next 12 to 18 months. The U.K.'s decision to abolish its 2 percent transfer tax could also lead to more IPOs, Charls said.

Investor outreach is a key component of EPRA's mission, and one it has embarked upon globally with the assistance of its peers (including NAREIT in the U.S. and APREA in Asia/Pacific). Across the globe, Charls said very few pension funds and other large institutional investors reach a base level exposure to real estate of 13 percent. In Asia, the exposure is even lower, where many funds have no exposure to real estate.

By meeting face-to-face with regulators and investors around the world, Charls said EPRA, NAREIT and others are able to educate properly regarding the benefits of the REIT approach to real estate investment and overcome any misperceptions.

"Investors need to understand REITs are great investments that turn out great cash returns, are transparent, are highly liquid and, on top of that, they provide excellent diversification," he said. "REITs are a fantastic value proposition that we can offer to pension funds and international institutional funds on a global basis."