Introduction:

The COVID-19 pandemic continues to have unprecedented effects on social life and the economy in Germany and worldwide. However, it is becoming apparent that the virus is relatively well under control not only in Germany but also in the other G7 countries and large parts of Asia, so that the restrictions resulting from the lockdown have been increasingly relaxed. Most importantly, however, it shows that Germany has overcome the temporary shock and there are some indications that the German economy is emerging from the corona-induced recession more mildly and more quickly than its international counterparts, especially as a broader recovery in economic activity has been emerging at the global level since May. Accordingly, we are optimistic that the global recovery, and thus also that in Germany, will gain momentum in the second half of 2020 and deliver strong growth rates in 2021.

For the players on the investor and occupier side, this raises the question of past and, above all, future market development, especially with regard to the sustainability of real estate investments and the safe return of employees to their workplaces. In addition, the virus accelerates the structural change processes in the retail trade, which is facing additional challenges and opportunities due to increasing digitalisation. Offline and online offers are essential for stationary retail, so that city centres remain attractive trading and meeting centres. The logistics sector is profiting from this structural change, which is also benefiting from reorganization of global supply chains and the associated trend towards re- and nearshoring, as well as increasing interest of investors in the sector. The demand for investments in residential real estate remains high and is increasing also in alternative, non-cyclical asset classes such as healthcare and social real estate or data centres. The latter are not only profiting from the wave of digitalization that is sweeping through all sectors and the increase in the amount of data but also increasingly from the structural change accelerated by COVID-19 with regard to how we work (remote working/home office), consume (online trading), use services (streaming) or spend our leisure time (e-sports/gaming/GPS tracking).

This is certainly a challenging time, but also exciting one. And, as is so often the case, crises triggered by exogenous shocks also offer numerous opportunities, especially as there is still a great deal of liquidity in the market, which is looking for risk-adjusted investment opportunities. The German real estate market could once again live up to its reputation as a relatively safe investment haven.

With this overview, we offer up-to-date insights into the effects of the virus on the various real estate sectors and look forward to an intensive dialogue with you. Our team of proven experts will be happy to assist you at any time.

Current Situation

  • The measures introduced by the German government to contain the pandemic are proving effective.
  • The new Corona Warning App provides the German government with a useful tool to contain the further spread of COVID-19. According to the Robert Koch Institute, one month after its launch, around 18.2 million (as of September 15, 2020) smartphone users have downloaded the corona warning app.
  • A further decline in the number of new infections was and is decisive for the existing easing of the regulations, which were decided on 6 May at the conference of the German Federal Government and the states. Recently, the number of corona cases in Germany has increased again and the infection rate (reproduction number) with the corona virus in Germany is currently slightly above 1 (7-day R-value, as of September 20), after a strong increase was recorded between the 29th and 34th calendar week. This was mainly due to large celebrations with family and friends or, particularly in the case of younger people, to returning travelers from risk areas.
  • In order to avoid a further lockdown at the state or even nationwide level, an emergency mechanism (in the sense of an infection ceiling) was established. Under the new rule, the measures will be tightened if more than 50 people newly infected with the coronavirus SARS-CoV-2 per 100,000 inhabitants in a district or a city occur in the previous seven days. 
  • Despite the recent increase in the number of cases, the German economy is on the upswing again. This is also confirmed by the current labor market data, which showed no additional corona-related increase in unemployment figures in August, so that we are moving back to a certain normality more quickly, even though this represents a new normality.
  • Currently, many leading indicators as well as the short-term, in some cases even daily, real-time indicators (e.g. the German Federal Statistical Office's truck toll index or the Bundesbank's weekly activity index) indicate that the German economy is on the verge of a strong recovery from the summer onwards after the massive slump in spring. The ifo business climate index improved further to 92.6 points in August (after 90.4 points in the previous month). This was the fourth consecutive increase and shows that the German economy continues to recover. Recently, the ZEW Indicator of Economic Sentiment also continued to rise, showing that the German economy should recover noticeably - despite rising corona infection figures and stalled Brexit negotiations.
  • The figures on the labour market currently indicate that it could come through the corona crisis comparatively well. Unemployment rate in July increased only slightly to 6.4% from 6.3% in August. This development is being supported by the billion-euro economic stimulus package of the German government, and the short-time working regulations should ensure that companies do not have to part with the urgently needed skilled workers and their knowledge. However, the corona pandemic clearly reveals which companies and business models will be able to survive in the future, and there will certainly be restructuring and layoffs in some sectors of the economy (including the hotel and restaurant sector, but also the aviation industry and retail trade) and companies will go bankrupt. Nevertheless, also or especially in Germany, we are looking realistically-optimistically into the future, without closing our eyes to the structural and economic challenges.


Last updated on September 21, 2020

Covid-19

Visit our global Covid-19 content hub for timely insights and expertise during this unprecedented time.