Development of the German investment market in the first half of 2020

In the first half of 2020, the investment market in Germany is under the influence of the Corona crisis. While large transactions still dominated the market in the first quarter and the transaction volume increased once again compared to 2019, the second quarter is characterised by restraint. According to Real Capital Analytics (RCA), the transaction volume was around € 5 billion in the first quarter. This corresponds to an increase of approximately 5% compared to the previous year.

 

By contrast, the real estate climate deteriorated strongly in the second quarter. According to bulwiengesa, an expert survey revealed a decline of around 37% in the German Hypo Real Estate Index (Deutscher Hypo Immobilienindex) in April 2020. This is not surprising and reflects the uncertainty in the market. However, a strong differentiation must be made between asset classes. Retail and hotel properties are most affected. An increase in insolvencies is expected for many commercial transactions from the second half of the year onwards. This will certainly have an impact on future rent levels and yields. In some cases rents are deferred, suspended or renegotiated. The new rentals are regularly at a lower level but instead with new contract periods.

 

 

The situation is similar for hotel properties. This asset class is particularly hard hit by the shutdown. City hotels in particular, whose sales depend on tourists, congresses or trade fairs, still face an incalculable risk. At the moment it is not possible to predict when the occupancy rates will reach the previous year's level. This uncertainty will certainly cause initial yields to rise and the volume of transactions to fall.

 

Declines are also expected in the office segment, but at a slightly lower level than in the first mentioned two asset classes. A rethink is to be expected in the world of work. Home office and teleconferencing will certainly gain in importance. It can be observed that re-letting activities have been postponed and the development of rents is stagnating. Nevertheless, the office segment is expected to generate the highest transaction volume of all asset classes.

 

In contrast, a stable trend was observed in the logistics market. Neither the price level nor the rent level has fallen in recent months. However, a decline in the transaction volume is also expected here.

 

By contrast, the market for multi-family houses and residential and commercial buildings is proving to be extremely robust. Here, the volume of transactions declined too, but with stable yields for multi-family houses and a slight increase for residential and commercial buildings.

 

The effects of the Corona crisis cannot yet be concludingly predicted. Various monetary packages of measures and legislative amendments have been enacted by the government. The extent to which these measures will stabilise or even stimulate the market will only become clear towards the end of the year.

Cordially
Dr. Gleser & Dalhoefer