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ePaper created 2012-04-20, 15:08:32 | version 1.23.0
19Management Report Münchener Hypothekenbank eG location properties with high quality amenities. The one-sided demand for core properties not only tightened their availabil- ity, it also caused the gap between prices paid for A and B lo- cation properties to widen even further. “Demand for commercial property rose as investors viewed Germany as a safe location.” Changes were noted last year on the provider side of the com- mercial property financing market as some foreign and dom- estic financiers pulled out of the market. These changes, how- ever, only had an immaterial effect on the market as sufficient numbers of commercial property financiers continued to com- pete with each other in this segment. The low level of interest rates led to attractive financing conditions in most cases, too. Nevertheless, during the course of the year discussions arose concerning a possible credit crunch in the property financing sector due to the new, stricter regulatory requirements facing banks. These requirements were reflected by in lending levels as banks frequently tightened their requirements for investors’ equity capital participation, customer creditworthiness, and the stability of the cash flow generated by the collateral prop- erty. This development was generally accompanied by inves- tors’ reduced appetite for risk, as well as their focus on safe properties offering stable value. Commercial property – international Demand noted by the European commercial property markets in 2011 was impeded to a great extent by the difficult eco- nomic environment, with turnover only recovering substan- tially in the fourth quarter. As a result, the total volume of transactions recorded for the entire year only rose modestly to € 115 billion. Investors throughout Europe focused on core properties and stable markets. In addition to Germany, they primarily concen- trated on strong economic regions located in the UK, France and Scandinavia. These countries recorded greater investments in 2011 while activities in countries like Italy, Portugal and Spain declined. Professional investors acted cautiously in the UK due to the weak economy and budget consolidation measures. Demand for office property was only very selective. The situation was similar in the retail property segment, where higher prices were only observed in individual cases. Only London and a few other major cities, where national and international investors fo- cused their efforts, were exempted from this development. Above all other locations, prices paid for core properties in London rose. Investors in France were primarily interested in properties located in Paris and regions with strong economies. Financing requirements for commercial property loans remained significantly higher than they were prior to the outbreak of the crisis in the financial markets. Banks expected investors to par- ticipate in their financing packages with substantially higher levels of equity capital. At the same time, banks also reduced their average volume of financing to limit their risks. “Investors in the European commercial property markets remained focused on easy-to-rent, prime location properties with high quality amenities.” Despite the rather slow moving American economy, the fa- vourable trends noted for the commercial property market in the USA also continued into 2011. Attention remained focused on the core markets of New York City, San Francisco, Washing- ton DC, Boston and Los Angeles. Demand for core properties with stable rents exceeded supply. This led investors to once again taking a closer look at central business district proper- ties in secondary markets, as well as properties located along the fringes of primary markets. The market situation in secon- dary markets eased slightly. In contrast, the American financing market for commercial prop- erty only functioned to a limited extent in 2011. Furthermore, the recovering commercial mortgage-backed securities (CMBS) market also experienced setbacks during the second half of the year. Financiers primarily lent money for property transactions backed by properties with long-term tenants in the aforemen- tioned five core markets, as well as to first-class borrowers.