Deutsche Bank AG, whose asset management unit has about 41 billion euros ($55 billion) of property investments, is looking for opportunities to buy Spanish and Italian offices and shops on behalf of German institutional clients for the first time in three years.
German pension funds and insurers that invest with Europe’s second-largest bank have begun to show a willingness to target assets in southern European countries hurt by the sovereign debt crisis, Georg Allendorf, head of German real estate at Deutsche Asset and Wealth Management, said in an interview last week. His unit manages about 12 billion euros of real estate.
“A window of opportunity has opened,” he said. “We’ll never be able to time the bottom precisely, but if you buy after prices have come down, you can catch the upside when the market turns around.”
Institutions have cut their investments in Spain and Italy in the past three years as property values fall amid an economic slowdown. Madrid prime office prices have slid 20 percent since 2010 and retail property prices have dropped 6.8 percent, according to data compiled by broker Knight Frank LLP. Prime offices in Milan, Italy’s financial capital, fell 1 percent.
It’s safest to invest in centrally located offices and retail properties in large cities such as Madrid, Barcelona, Milan and Rome, said Allendorf.
“There will always be demand for core offices and retail,” he said. “The euro crisis doesn’t affect those markets.”
Funds overseen by Allendorf have about 1.5 billion euros available to spend on new buildings around the world in 2013, compared with about 2.2 billion euros of investments made globally in 2012. There’s no guarantee that all the money will be spent, Allendorf said.
“It’s not clear to us whether sellers are willing to sell at prices that we consider reasonable,” he said. “We’ve been observing the market.”
Deutsche Bank’s asset and wealth management unit has about 15 billion euros of real estate investments in Europe, including 900 million euros in Italy and 1.7 billion euros in Spain, according to data provided by the company. About 21.6 billion euros of its property investments are in the U.S. and 4 billion euros in Asia.