GERMANY’S real estate sector is riding a wave of mergers and acquisitions as market players seek to take advantage of low interest rates and the relative lag in property prices compared with those in neighboring countries.

    Last week, the sector’s No. 1 Vonovia threw its hat into the ring, announcing it was prepared to stump up as much as 14 billion euros (US$16 billion) for rival Deutsche Wohnen if it failed to tie the knot with the No. 3, LEG Immobilien.

    Deutsche Wohnen dismissed Vonovia’s advances as “uninteresting and inappropriate,” adamant that its 5-billion-euro merger with LEG would go ahead.

    But the deal still needs to be approved by the shareholders of Deutsche Wohnen and some of them appear to believe the price is too high.

    The current battle is the biggest so far in a sector that has been flowing with mergers and takeovers for months.

    Since the beginning of the year, Vonovia, formerly known as Deutsche Annington, has got its hands on both rivals Gagfah and Suedewo for nearly 6 billion euros, boosting its portfolio to 370,000 residences across Germany.

    “This process of consolidation has gathered momentum over the past three years,” said Konstantin Kortmann, head of the German operations of U.S. group Jones Lang LaSalle.

    “Of the numerous small and mid-sized companies in the sector in Germany, there are still only five or six larger ones left,” he said.

    The momentum is being driven by the historically low level of interest rates in Europe, which make the financing of such deals cheap.

    But the steady rise in rent in Germany in recent years — albeit from levels lower than other European capitals — is another key factor, as unlike in other countries where rent is stagnating, they look set to continue heading up.(SD-Agencies)