German property market hot after deals of $59 bln in 2014

FRANKFURT, Jan 7 (Reuters) - Record low interest rates and investors' search for higher yields will heat up Germany's real estate market in 2015, after more than 50 billion euros ($59 billion) of property changed hands last year, several large brokers said on Wednesday.

The lion's share of last year's activity involved offices, commercial space and hotels, where investment volumes rose by almost a third to nearly 40 billion euros, the fifth consecutive annual increase, property investment manager JLL said.

Transactions in the residential market reached 13.3 billion euros, broker CBRE said, pointing out that its data referred to portfolio sales of at least 50 units and not individual properties.

Residential investors such as Deutsche Annington, Buwog and LEG Immobilien took advantage of cheap financing conditions to make acquisitions last year.

However, volumes in this segment fell 3 percent short of those in the prior year due to a limited supply of properties.

"Demand on the part of large residential property and institutional investors is being only insufficiently met by the supply on hand," said CBRE's head of residential investment Konstantin Luettger.

A number of investors have found the prices in major metropolitan areas too high and are branching out toward smaller cities where margins may be higher.

Commercial real estate, on the other hand, still has room to grow, with JLL predicting that transactions will surpass 40 billion euros this year, as the German market continues to draw interest from foreign and domestic institutional investors like pension funds.

The sale of The Squaire office and hotel complex at Frankfurt airport looks set to be one of the largest deals this year. Current owner IVG Immobilien is asking around 700 million euros for the complex, a person familiar with the deal told Reuters previously. ($1 = 0.8460 euros) (Reporting by Kathrin Jones, writing by Jonathan Gould; editing by Thomas Atkins and Susan Thomas)