At MIPIM 2026: Ulrich Höller on current topics in the real estate industry

The global economic situation remains fragile. The current war in the Middle East is also increasing uncertainties about future interest rate developments and effects on the markets.

At the end of January, the German government had forecast moderate economic growth of around 1.0 percent for 2026. After two years of recession and a weak increase in 2025, this indicated a certain economic calm, but not a new upswing. The extent to which these expectations need to be corrected now also depends on the duration of the conflict in the Gulf region.

So far, overall economic development has been driven primarily by government investment, private consumption and calendar effects. So far, there has been no nationwide investment momentum in the private sector or significant export impulses.

For the real estate industry, this environment means improved predictability, but does not replace the lack of independent demand impulse. Investment decisions in the residential and office sector will remain selective in 2026 and will depend largely on financing conditions, capital expenditure and regulatory clarity.

The development of interest rates plays a central role. It influences both the valuation of properties and activity on the transaction market. The focus is less on the lowest possible interest rate, but rather on the expectation of reliable framework conditions. With the stable deposit facility of 2.0 percent at the European Central Bank (ECB), a significant factor of uncertainty has been eliminated. Whether and how the ECB will react to developments in the Middle East remains to be seen. What is clear, however, is that investors will become active where cash flows can be realistically planned, the investment requirements remain manageable and there are comprehensible exit paths.

Properties with high investment costs and unclear connection use, on the other hand, continue to come under pressure. Prospective buyers expect higher returns, banks demand risk premiums. Both lead directly to falling market values. Financing thus becomes the decisive selection instrument.

Lending will remain cautious in 2026, but is increasingly stimulating the market. Banks are examining projects in a much more differentiated way, and alternative financing players and debt funds are increasingly coming to the fore. Location quality, usage prospects, earnings stability and ESG compliance determine the framework conditions. There are financing opportunities for value-add properties if the investment requirements are realistically calculated, approval risks can be controlled and sufficient equity is available. In the case of properties with high expenditure but no clear renovation or exit path, the financing leeway decreases significantly.

In addition, the pressure is growing due to the upcoming wave of refinancing of existing financing from the low-interest phase. Follow-up financing is provided at higher interest rates and under stricter contractual conditions. Owners are thus faced with the decision of whether to inject additional capital, reposition the property or sell it. This brings more movement into the market again, but selectively and not nationwide.

The housing market will continue to maintain its role as the most stable segment of the real estate industry in 2026. Demand is structurally justified, while supply continues to lag significantly short of actual demand. New construction activity remains limited. The reasons for this are persistently high construction costs, complex regulatory requirements and unclear funding conditions. As a result, forms of use such as serviced apartments, long-stay living and student housing are gaining in importance because they create additional living space in high-demand locations and can often be implemented more flexibly than classic new residential construction.

Financing is mainly provided for residential projects in sought-after locations, portfolios with manageable renovation needs and projects with secure funding and approval requirements.

The situation is difficult for portfolios with considerable energy catch-up demand if investment expenditure and achievable rents cannot be brought into an economic relationship. In such cases, there is a risk of restrictions on financial viability and structural value adjustments. In 2026, the housing market will therefore be less subject to economic cycles and will increasingly be shaped by political and regulatory framework conditions.

The housing turbo illustrates this market mechanics. The instrument sent the right political signal by addressing speed as a bottleneck. From an investor's point of view, however, the effect remained limited. Accelerated procedures do not compensate for high construction and capex costs, uncertain funding logics or more restrictive financing conditions. In practice, the impetus fails less because of the legal framework than because of a lack of implementation capacity in the municipalities and economic realities. The construction turbo thus shows in an exemplary way: speed is necessary, but without financial viability, it is not an investment trigger.

In the office segment, the already existing polarization is further intensifying. Economic stabilization does not lead to a broad recovery in demand, but to targeted selection. High-quality office properties in central locations with modern space quality, good accessibility and proven ESG compliance, such as the "Central Parx" in Frankfurt, remain in demand and are generally affordable. In these sub-markets, stable to slightly rising prime rents are possible. At the same time, the supply in these segments is limited.

Office properties with functional deficits, high investment requirements or limited third-party usability, on the other hand, are coming under increasing pressure. They are confronted with higher risk premiums, limited willingness to finance and falling market values. In this environment, financing becomes a corrective: only properties with a convincing perspective are given access to capital.

In addition to its expertise in office development, ABG Real Estate Group has significantly expanded its residential activities. At the same time, the asset management business for institutional investors is growing in a targeted manner.

In investment and asset management, ABG Real Estate Group recently received a mandate from several institutional investors from the professional pension fund sector for a portfolio comprising four properties. These are four extraordinary, prominent properties: the Garden Tower, the Eurotheum and the Japan Center in Frankfurt's CBD as well as the Pressehaus am Alex in Berlin. The portfolio is jointly held by several institutional investors.

In addition, the company is responsible for asset management for the listed hotel "Taschenbergpalais" in Dresden.

In the office segment, the development of the "Central Parx" in Frankfurt is proceeding according to plan. It is one of the most striking revitalisation projects in Frankfurt and will be comprehensively revitalised in a joint venture with HanseMerkur Grundvermögen AG by the beginning of 2028. The space is already almost fully let. Another project in the centre of Frankfurt is currently being planned is the comprehensive renovation of the "Palais Rossmarkt", another top landmark project. Construction is scheduled to start here at the beginning of 2027. HanseMerkur Grundvermögen AG is back on board as a joint venture partner.

In the residential segment, the "Mariengärten" in Munich are in the concrete preparation phase. The approval decision of the development plan procedure was issued in December 2025, and the implementation of the project with over 500 residential units will begin in 2027. In addition, ABG Real Estate Group is developing the "Quartier Helene" in Munich's Europark in a joint venture with Values. For the approximately 43,000 square metre site and the planned new urban quarter with a mixed-use concept with up to 1,000 residential units, commercial space and supplementary functions, the City of Munich has approved the development plan procedure with the development plan decision.