Germany’s relatively strong economic outlook combined with the low volatility of its real estate market provides an attractive story for investors. The commercial property investment market has significantly picked up during the third quarter of this year. A total of 5.4 billion euros was invested in commercial property in the third quarter, up 26 per cent on the previous three months and the strongest quarter of the year so far. Transaction volumes for the first nine months of 2012 were 14.9 billion euros, down 14 per cent compared to the same period in 2011. The office sector in particular has seen increased activity in 2012, up 49 per cent compared with the first three quarters of 2011 and industrial investment activity is up 42 per cent. In contrast, retail activity is down as demand is frustrated by a lack of prime product. A notable exception is Hamburg Trust’s 400 million euro acquisition of the Milaneo centre in Stuttgart, the biggest single transaction in Germany in the first nine months of 2012. Unlike the United Kingdom and France, which are dominated by their capital cities, there are seven “gateway” cities in Germany: Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg, Munich and Stuttgart. Demand has focused on these cities, which have accounted for over 80 per cent of office volumes in first nine months of 2012. Notable deals include the purchase of the Allianz Headquarters in Munich for over 300 million euros and the sale of shares in Trianon in Frankfurt for around 230 million euros. Market conditions within these cities vary, in part due to the differences in tenant mix. Berlin, Hamburg and Dusseldorf have the greatest diversification while Munich is home to the headquarters of seven DAX companies. As Germany’s banking capital, Frankfurt is the least diverse. The investment market has a strong domestic component; there has been marginally more funding available in Germany relative to the rest of Europe and predominantly for local investors. However, there is an increasing level of international interest demonstrated by the purchase of Maximilianhöfe in Munich for 270 million euros by US investor Pembroke Real Estate, as well as the Norwegian Government Pension Fund’s recent entrance to the market, via the acquisition of two properties in Berlin and Frankfurt, for a reported 784 million euros, in a joint venture with AXA REIM. Looking ahead, we expect investor demand to remain robust supported by the low interest rates and strong occupier market fundamentals. We also anticipate that demand will keep prime yields at their current low levels. For the fourth quarter of 2012 a significant pick-up in activity is expected and a total transaction volume of 21-23 billion euros still seems to be realistic.