Barings names Germany a top pick as office prices sit 46% below peak

German office prices are down around 46% from their 2022 peak, according to MSCI, and Barings has put Germany back on its buy list. Jorge Duarte, the firm's managing director and head of equity portfolio management Europe, told IPE Real Assets at Expo Real in Munich that Germany is "one of our top picks right now because of the lack of liquidity" after being neglected by investors for the past few years.

BauMont Real Estate Capital has entered the German market with a €70 million residential acquisition in Munich. BauMont is a value-add fund manager owned by M&G Real Estate, working with local operating partner Reneo.

NBIM, which manages Norway's sovereign wealth fund, has teamed up with Art-Invest Real Estate to invest in offices in Germany. Art-Invest has taken over asset management of the Axel Springer Campus in Berlin. Rockfield and Ardian have acquired a majority stake in The Social Hub Berlin.

Rising German bund yields are a headwind for real estate allocations because they change how investors price the asset class on a relative basis. Oxford Economics says German commercial property now screens as offering a "subpar" return after accounting for risk. Industrial and hotels are fairly valued; retail, residential and office screen subpar.

Oxford Economics expects industrial to lead German commercial real estate returns over the next five years, averaging 6.7% a year on an unlevered basis. It cites greater defence spending, nearshoring and e-commerce as demand drivers and calls the German defence industry a bright spot in a struggling economy. BNP Paribas AM Alts cited the same defence channel in September, when it pitched European housing as a rearmament trade.