[We’re pleased to welcome authors Gertjan Wijburg and Manuel B. Aalbers of KU Leuven/University of Leuven, Belgium. They recently published an article in Competition and Change entitled “The internationalization of commercial real estate markets in France and Germany,” which is currently free to read for a limited time. Below, Wijburg and Aalbers reflect on the inspiration for conducting this research:]
Political economists rarely look at real estate markets. Our research group at the KU Leuven, named “The Real Estate/Financial Complex” and funded by the European Research Council, studies the relationships between finance, real estate and the state in a range of countries, including France and Germany, the two typical examples of Continental European capitalist countries. In this paper, we look into the commercial investment markets of these countries. Fieldwork and data collection have been conducted during two extended research stays in Frankfurt am Main and Paris.
Our work is deeply informed by our empirical research and interactions with real estate and finance professionals. The challenging aspect of our work was to get wider access to real estate and finance professionals in Frankfurt am Main and Paris, two global financial centres, and interviewing these specialists, often in prime real estate locations. Commercial real estate investors have their own account of processes of internationalization in their daily work experiences, which are central to our article.
Our results show how the French state perceived the arrival of foreign investors in the 1990s as a potential threat to the French property companies and implemented a new tax regime that allowed these companies to launch publicly listed real estate vehicles known as a Société d’Investissement Immobilier Cotée (SIIC). As such, the French property sector could attract foreign capital and increase liquidity, while enjoying new tax advantages. The rise of the SIICs was a major driver of the French investment boom of 2003–2007. In 2007, another major reform followed: the new tax regime of Organisme de Placement en Immobilier (OPCI) would gradually replace the old one of SCPI and transform French investment funds into ‘hybrids’ that could invest both in listed and non-listed real estate, with investments from not only institutional investors but also the general public.
Due to the shocks of German reunification, the momentum for internationalization of commercial real estate arrived relatively late. Major reforms in the German property sector were not implemented in the 2000s. Between 2003 and 2007, American private equity and hedge funds entered the market and invested unprecedented amounts of capital in the German property sector. However, the traditionally dominant non-listed investment funds in Germany also responded. The German Spezialfonds were able to invest heavily because they collected capital from pension funds and insurance companies. In the aftermath of the GFC, the German state has introduced a new Investment Code to make the non-listed real estate sector stronger. Contrary to France, the introduction of the G-REIT in 2007 has so far made little difference; the German preference for non-listed real estate remains strong.
We hope that our work inspires other researchers to conduct similar projects. We recommend researchers working in related fields to participate in real estate fairs and congresses to meet and encounter potential interviewees.
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