Led by the remarkably resilient German economy, the appetite for investment is strong. A high volume of money is seeking a home in German retail assets, although all high quality asset classes are in demand. The funds are predominantly coming from domestic pension funds and insurance companies and therefore, the flight is to high quality secured assets. The challenge is trying to find such deals. The deals are core covenant led with secondary and development proposals still very difficult to secure for all but the select number of cash rich investors.

Germany is a very attractive inward and domestic investment location on the back of the strong and diverse economy which is in contrast to some of their other G8 partners. The market is now able to function more fluidly than in recent years due to the German banks regaining control from their interim government masters. This is due to paying down their sovereign loans and being able to take more conventional banking decisions on risk. The memories and lessons from the last cycle are thankfully still fresh in the mind so deals of any significant size are in club format and the risk is syndicated through a series of lending partners. As lenders are not underwriting large deals independently, getting deals done is still an involved process however. Those participants have a slightly different make up with a number of the larger insurance funds now able and willing to lend, due to recent regulatory changes and through their emerging lending teams. These teams are being hired and although they are more sedate working environments for banking professionals than the more transaction orientated commercial and investment banks, they are able to offer secure long term money for highly graded borrowers. The market is still not however in full swing across Europe so bankers are being attracted to these conservative, sometimes slow moving, yet secure environments. These new participants are set to become a clear part of the property lending landscape going forward.

This translates into recruitment demand for high quality professionals who can navigate through demanding transactions, both property bankers, investors and asset managers. We have been particularly active recruiting at a senior level although analyst and associate positions are also on employers shopping lists. Due to the shortage of good quality professionals in the market, existing employers are being defensive, in trying to retain their employees. We are now seeing counter offers coming through for existing employees which is having an inflationary influence on salaries.

By Timothy Rowe