AHEAD INTO THE FUTURE
The phase of great uncertainty has now lasted more than two years. Against the background of zero growth in Germany, burdensomely high energy prices and ongoing heated discussions about misguided federal policy, large institutional investors are holding back, since the interest rate turnaround, they have preferred high-yield, “maintenance-free” government bonds rather than real estate.
Some project developers have been hit hard with bankruptcies. When it comes to office and commercial properties, too many risks prevent viable business plans and while tenants and end investors are missing, the EU guidelines for sustainable action (ESG / CSR) are driving up the already high standards in the equipment of buildings and thus also the construction costs.
Large transactions in core assets are rare. Only interest rate cuts could revive the market here. The currently preferred investment volumes are under 50 million euros.
The owners have now come to terms with the new reality and the number of properties for sale is increasing. While family offices with strong equity capital were already on the market as buyers at the beginning of the crisis, commercial investors with full equity are now again taking advantage of the fallen prices to purchase German real estate.
The great demand for barely existing rental apartments and the resulting constantly rising rents are also increasing the demand for investments in residential real estate, used, ESG-optimized or, ideally, newly built.
Light industrial properties and retail parks with a food anchor are also in demand, vacant properties are being sought for hotel properties; specialized operators are on an expansion course, room prices and occupancy are already back to pre-crisis levels.
So there is definitely reason for optimism. Despite all the difficulties, the German real estate market shows its resilience and adaptability. Investors are actively looking for new opportunities and innovative concepts are becoming more important.
The interest rate turnaround has brought uncertainty, but it has also opened up new opportunities for us. With creativity and courage, this new reality can not only be overcome, but also used to your advantage.
Off to a promising future!
Delano Kyles · CEO & Managing Partner
