The German economy continues to be moved by a large number of ambivalent macro influences: Evian, Iran Peace Treaty, two months in a row of declining domestic inflation and a slight brightening of the ifo business climate index on the one hand, an increase in the ECB deposit facility and the certainty that only a few certainties are currently permanent on the other.
The effects this has on prices, volumes and the general market feeling on the German real estate market are discussed in the second issue of Baker Tilly Real Estate Trends.
Restrictive credit environment weighs on financing and investments
The main obstacle to all activities remains the availability of adequately priced debt capital. Not only the actions of the ECB, but above all the cautious approach on the part of the banks, combined with increased risk premiums and lengthy decision-making processes, make it difficult to plan and realise real estate projects.
A current example with a nationwide effect is the failed sale of the Opera Tower in Frankfurt, which did not materialize despite strong property and cash flow data due to a lack of adequate overall financing. As a result, the hoped-for reset of the German office investment market could not take place.
Opera Tower deal prominent example of concerns on the funding side
“The failure of the Opernturm deal is regrettable in many respects, after all, this lighthouse transaction was supposed to set the anchor for Offices 2026 and thus facilitate further pricing for office projects in the next six months. The fact that even real estate transactions without recognizable weaknesses cannot be closed due to volume shows how great (and perhaps not always rational) the concerns on the funding side are at the moment,” says Andreas Röhr, Partner in the Real Estate Valuation practice at Baker Tilly. “At the same time, and this is the other side of the coin, the market will offer interesting opportunities for countercyclicals and investors with strong equity in the coming months. Re-pricing on the seller’s side, which is also necessary for the conclusion of transactions, will come, one way or another.”
Other topics in this issue
The Baker Tilly 5×4 matrix: Prime rents and yields in the office, residential, logistics and highstreet segments for the five major German real estate strongholds. Comeback of the sale-and-lease-back as a liquidity provider – opportunities and challenges in the optimization of capital structures. Expert Section: Interview with Kruno Crepulja, Chairman of the Board and CEO of Instone Real Estate Group.
