IPD also confirm that highly specialised investment vehicles focused on hotels, logistics, healthcare, parking and student accommodation all reflect this trend.

"Analysis from IPD on the total returns of various sectors in Germany shows significant differences," said Daniel Piazolo, Vice President & Geschäftsführer Germany, IPD. "However, we should be aware that the period for which data is available for niche sectors is much shorter than for mainstream real estate."

Focusing on the period 2003-2012, real estate investments in Germany returned 3%pa overall. As office properties still dominate the portfolios of institutional investors, this sector – which returned 2.0%pa in the period concerned – has a strong influence on the overall result. In contrast, the retail (4.3%pa) and the residential (5.1%pa) sectors have performed much more strongly over the last 10 years. The residential sector (itself a niche area a few years ago), has meanwhile undergone a revival, with a significant rise in transaction volumes.

However, the returns for alternative real estate sectors shows that hotel assets, which are already a well-established part of institutional investors' portfolios, have returned 4.4% over the last 10 year period, outperforming the overall market considerably.

Differences in capital growth have been the main driver, as hotels have been affected by much lower value declines than office and retail properties, whereas their income return matched that for the whole market.

As a result of the globalisation of markets and booming e-commerce, the logistics sector has
grown in popularity amongst real estate investors. Focusing on properties of over 10,000 sqm²
built since 1997, the logistics sector has underperformed over a 5-year horizon due to weak
returns in 2008/2009, but generated the highest return of all use types in the years 2010-2012 (7.2%pa). This volatility resulted from variations in capital growth, but income return remained above 7% in all years.

Similar results to those for logistics are seen for some niche segments of the retail sector. Retail
warehouses have provided an annualised income return of 7%pa over the last 10 years, but
suffered from ongoing write-downs leading to a total return of 4.3%pa accompanied by significant volatility. In contrast shopping centres generated more stable returns in the period 2003-2012, but with an annualised income return barely exceeding 5%pa, their total return of 4.4% only just outperformed retail warehouses.

The healthcare sector, which combines nursing homes, clinics, and medical centres, forms an
emerging part of the investment universe. A first indication of performance over the last 3 years shows an annualised total return above 7%pa, with the income return of around 7% pa the most important performance driver.

"Alternative sectors like logistics, retail warehouses and healthcare feature above-average income returns, perhaps reflecting risk premiums for these assets. However, despite some indication of strong returns from investments in niche and emerging sectors in the last few years, long-term observation, and analysis of performance will be needed to evaluate the attractiveness of such assets," added Daniel Piazolo.