Sirius continues to operate largely in Germany where it owns and manages a well-diversified portfolio of mature business park assets, as well as those where there is an opportunity to add value through asset management. This year the Company also acquired BizSpace, a leading provider of regional flexible workspace across the UK, offering light industrial, workshop, studio and office units to a wide range of businesses. The acquisition complements Sirius’ existing platform and allows for meaningful operational and financial synergies. Sirius’ portfolio in the UK and Germany continues to increase in size through a combination of organic and acquisitive growth underpinned by the Company’s internal operating platform.

In Germany, the primary focus is to build a “critical mass” around its “big seven” cities of: Berlin, Hamburg, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich. The Company has a secondary focus on a selection of key border towns where we can reap the benefits of markets on both sides of the border and the periphery of the “big seven” cities. The Company provides in the region of 1.8 million sqm of manufacturing, storage and office space. To maximise the utilisation of space, Sirius has developed a range of high-yielding products including serviced offices, self-storage and workboxes which have their own Smartspace brand and are particularly popular with tenants seeking flexible solutions to their accommodation needs. The products are usually created through investment into space that other owners may regard as a structurally void and then using the capability of the in-house sales and marketing teams to let these at premium rental rates. The Company’s tenant base is diverse ranging from multinational corporations and government agencies to SMEs within the German Mittelstand and individual tenants.

In the UK, BizSpace is a leading provider of regional flexible workspace. Offering office, studio and workshop units to a wide range of businesses in convenient regional locations. The Company provides in the region of 4.3 million sq. ft across 72 sites. The business provides Sirius with a unique opportunity to enter, at scale, an under-served wider UK market with the one-step acquisition of an established platform. Additionally, it provides Sirius with a high-quality portfolio in a supply constrained market and offers significant organic growth potential in rental pricing. BizSpace’s tenant base is similarly diverse, ranging from multinational businesses to manufacturing-focused SMEs and individual tenants.


The German market

Germany remains comfortably the largest economy in the European Union and the fourth largest in the world after the USA, China and Japan. It has maintained its reputation as an industrial powerhouse with a strong export-focused economy characterised by low unemployment. Relative to many other European economies Germany performed well through the Covid-19 crisis and, notwithstanding the impact of recent events in Ukraine and related economic effects, is projected to grow strongly in 2022. At the time of writing, which was before the material escalation of events in Ukraine, the OECD predicted 4.1% GDP growth in 2022 and a further 2.4% in 2023.[1] It expects a strong potential rebound in manufacturing if supply restraints begin to recede, with interest rates and unemployment projected to remain relatively low. Following more recent events in the Ukraine it is clear forecasts of economic growth will need to be revisited with many commentators pointing to significant inflationary pressure particularly in relation to utilities and the likelihood of interest rate increases.

Commercial real estate transaction volumes in Germany in 2021 were €64.1 billion according to BNP Paribas; this is the second highest year recorded, which demonstrates remarkable underlying resilience given the disruptive factors the market faced in 2021 such as supply bottlenecks for primary products, the rise in inflation and the ongoing challenges presented by Covid-19 and the conflict in Ukraine. Once again, the majority of sales volume was registered in and around Germany’s seven major cities (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart), totalling €37.1 billion, exceeding the prior year by 14%. Unsurprisingly Berlin leads the way with €11.2 billion invested, the second highest total on record and up 25% on the previous year. Munich follows with €7.7 billion recorded, up 53% on the previous year. Frankfurt follows in third place with just under €6.7 billion, roughly similar to the previous year. Cologne recorded the strongest growth, up 182% to €3.8 billion. In contrast there were declines on the previous year’s performance in Hamburg at €3.1 billion (-43%) and Düsseldorf at €2.4 billion (-34%). Looking at investment types, offices remained the top performer, with approximately €30.7 billion of investments; around 48% of transaction volume is attributable to this class. Logistics properties followed with a volume of just under €9.9 billion; this is an increase of almost 25% on 2020, setting an all-time high. Foreign investors were responsible for around €24.8 billion of capital investment, around 39% of total investment levels – at a similar level to last year.[2]

Looking closely at economic data examining Germany’s so called “Unternehmensimmobilien” – a distinct asset class of German multi-use and multi-let commercial properties, that is home to the heart of the Germany economy – we can see a strong recovery in the sector in the first half of 2021. A new record was set in H1 with an investment volume of around €2.9 billion, an increase of 87% compared with the previous half year. Some of this activity was likely due to a “catch-up effect” from the previous year’s disruption. Looking at the different categories that make up the Unternehmensimmobilien we can see that business parks are the most in-demand category, accounting for a significant 48% of total volume. Light manufacturing properties are the second most in-demand category, at 23%; notably this is the only property type among the Unternehmensimmobilien that can point to a volume of take-up in the first half of the year that is above the average of the past five years, exceeding it by around 16%. Demand for warehouse properties was much lower, at just 4,000 sqm. Looking at specific sectors more closely we can see that manufacturing remained an extremely important driver of demand for space, demonstrating the robustness of the sector. Accounting for 30% of total take-up, exceeding its average by around 9%. Some clear regional trends emerged in the first half of 2021. Munich and the surrounding area accounted for one-third of the total transaction volume with €934 million. The Rhine-Ruhr conurbation follows, accounting for €378 million in volume, and the West region registered the third highest volume at €375 million.[3] The Unternehmensimmobilien has been resilient as an asset class during past major economic events and recessions and appears to have maintained resilience through Covid-19 too. This is due to multiple factors such as the flexibility and diversity inbuilt within multi-tenanted business parks, the tendency for companies engaged in production and manufacturing to respond to economic contractions by reducing output rather than space and the depth of the Mittelstand market – these factors all contribute to the ongoing growth and stability of the asset class.

The UK market

The UK economy bounced back strongly in 2021 with growth registered at 7.5%, despite falling back in December due to new restrictions to manage the Omicron variant. Prior to the escalation of events in Ukraine, the OECD pointed to the UK economy growing by a further 4.7% in 2022 with business investment set to improve when compared to recent years as the country adapts to the new post-Brexit environment.[4] The OECD pointed to unemployment continuing to fall, and inflation is set to slow, heading back towards the 2% target by the end of 2023. Following more recent events in Ukraine it is clear forecasts of economic growth will need to be revisited, with many commentators pointing to significant inflationary pressure particularly in relation to utilities and the likelihood of interest rate increases.

As a result the prospects for growth in the commercial real estate sector and in the UK regions remain uncertain despite supply constraints due to a lack of land and increased building costs driving rental growth. Looking back to 2021, quarter four of 2021 saw commercial property in the United Kingdom record its best single-quarter total return since quarter four of 2009. A quarterly return of 6.3% drove the rolling annual total return of the MSCI UK Quarterly Property Index to 16.5%, a six year high. However, while previous cyclical upswings saw the main property sectors move in relative unison, the current cycle is largely driven by the strength of industrial property. Of the 16.5% annual index return, 12.9% could be attributed to the industrial sector courtesy of a 36.4% total return. Yield compression was the main driver of industrial outperformance as its equivalent yield effectively halved in ten years as it strengthened to 4.2% at the end of 2021 from 8.4% in quarter four of 2011. The combined impact of a strengthening yield and rental growth saw industrial become the largest sector by value in the Index at 35%, up 2.3x over ten years.[5] In its 2022 cross-sector outlook published prior to the escalation of events in Ukraine and agnostic of the related economic impact, Savills also noted that regional office markets saw upward pressure on pricing in 2021 and it expects this to continue into 2022 and beyond, noting that some regional office markets look undersupplied.[6]






[5] investment-market/germany-at-a-glance.



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