German real estate market shows signs of recovery
The German real estate market was considered one of the most profitable and stable. However, the coronavirus pandemic affected the natural course of things. While at the beginning of the year it was possible to talk about increased demand, the quarantine period and global processes have made their adjustments. Therefore, it is quite difficult to say exactly when the market will recover, first of all, we need to understand the picture that is observed now and in the past months.
In the first quarter of this year, the pandemic has not yet affected the processes in the segment. The projects that were at the stage of completion were continuing, the deals were concluded. However, in March a decline began to be felt, demand fell, investors began to withdraw capital and freeze construction. Despite this, the first quarter ended quite well – the total volume of transactions in the segment amounted to €28 billion, where about €18 billion was spent on commercial real estate and 9.7 billion – on residential projects. Compared to last year, there was an 82% increase. This amount is based on major acquisitions and investments by international corporations. However, the market showed good dynamics even without such large projects. The office sector was pleased, where 20 deals with various assets worth over 100 million euros were concluded.
Experts are cautious in their forecasts because of the unstable overall situation in the world, but they agree on one thing – Germany has not lost interest from investors, and they are ready to invest in its property even in a difficult period.
Most market participants share the opinion that the volume of capital in the segment will decrease, while a survey among investors showed that 48% of them are not going to abandon the planned transactions. Many want to remain active in Germany, but there are some difficulties.
First of all, the difficulty is the volatility of market value, and there is confusion with pricing. In order to reduce the risk for themselves, banks have also decided to introduce restrictive measures when issuing loans, which slows down transactions.
The situation in the office property sector is worrying. The share of transactions here has decreased in the current year, and is about 18%. Investments in these objects were at the level of 5 billion euros, which is 2 times more than in housing. Investments in apartments, student housing and retirement homes amounted to 10.7 billion euros. Experts note a growing interest in health related facilities, such as medical centers, and assume that the demand for these assets will increase.
The total number of transactions with retail real estate amounted to 4 billion euros, most of which went to discounters and retail stores.