Introduction:

The COVID 19 pandemic continues to have an unprecedented impact on social life and the economy in Germany and worldwide. The currently continuous high number of new infections and the recent sharp rise in the number of deaths show how important it is to contribute to the containment of the coronavirus through joint adherence to protective and hygiene measures. After the "Lockdown Light" imposed for November did not lead to the hoped-for significant reduction in new infections and the case numbers have risen since 4 December - the reported R-value in Germany is still around 1 -, the federal and state governments decided on 13 December on further restrictive measures to contain the Corona infection numbers. The regulations came into force on 16 December and are to apply until 10 January 2021 for the time being.

After the drastic slump in German economic output in the second quarter and the rapid recovery in the third quarter, a renewed contraction in overall economic development is to be expected in the winter quarter in view of the renewed and extended lockdown, although the decline should be relatively moderate compared to the spring. Hope that the coronavirus will become more manageable in the foreseeable future and that social life and economic interaction will be less affected by it is raised by the increased approval of vaccines in recent days and the prospect that the medical resources needed for a successful pandemic response will also be available in Germany before the end of the year. Against this backdrop and good fundamental data in Germany, there are some indications that the German economy could emerge from the corona-induced recession more smoothly and quickly by international standards, even if the economic recovery will be delayed as a result of the renewed lockdown.

Globally, and especially in Asia, the recovery from the coronavirus recession also remains intact, but it is uneven across economies and could take longer in some countries as the unwinding of restrictions stalls or regresses as it did recently as a result of the second wave of infection. The global recovery is also uneven across sectors, with the services sector - and the hotel, restaurant and event industry, as well as parts of the retail sector in particular - continuing to face major challenges.

Recent mobility data show that the latest restrictions on social life are affecting countries in Europe to a much lesser extent than in the spring. Furthermore, the economy in the Eurozone is increasingly stabilising, as shown by the December figures of the Purchasing Managers' Index, which combines industrial companies and service providers. With a strong increase of 4.5 points to 49.8 points, the sentiment barometer is thus moving close to the growth threshold of 50 points again. The German economy in particular is very dynamic thanks to the strong recovery of the industrial sector in December. With an increase of 0.8 to 52.5 points, not only was the growth threshold clearly exceeded, but it also reached its highest level in almost three years.

In view of the success in the search for an effective Corona vaccine and the imminent approval by the regulatory authorities, we are confident that the global recovery, and thus also that in Germany, will continue with greater momentum in the coming year and the year after. This development will be supported by generous bond purchases by the leading central banks and extensive fiscal policy measures, which will also have a positive impact on the real estate markets.

For the players on the investor and user 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 workers to their workplaces. In addition, the virus accelerates the structural change processes in the retail sector, which faces additional challenges or opportunities due to increasing digitalisation. Offline and online offers are imperative for stationary trade so that city centres remain attractive centres of trade and encounter. The logistics sector is benefiting from this structural change, which is also benefiting in this country against the backdrop of the reorganisation of global supply chains and the accompanying trend towards re-shoring and near-shoring and is enjoying increasing interest on the part of investors. The demand for investments in residential real estate and increasingly also in alternative, non-cyclical asset classes such as healthcare and social real estate or in data centres remains high. The latter are benefiting not only from the wave of digitalisation sweeping all industries (keyword: Industry 4.0) and the resulting (almost) unchecked increase in data volumes, but also increasingly from the structural change accelerated by COVID-19 in terms of how we work (remote working/work from home), consume (online retail), use services (streaming) or spend our leisure time (e-sports/gaming/GPS tracking).

These are certainly challenging times, but also exciting. And as is so often the case, crises triggered by exogenous shocks also offer numerous opportunities, especially as there continues to be a great deal of liquidity in the market 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 impact of the virus on the various real estate sectors and look forward to an intensive dialogue with you. We are at your disposal with a proven team of experts at any time.


Current Situation

  • On 28 October, the federal and state governments decided on drastic measures, which will last until the end of November, to curb the considerable increase in the number of Corona infections in Germany. The aim was to prevent severe courses of the disease and deaths, and also to prevent the health system from being overburdened.
  • The "lockdown light" imposed for November was unable to slow the sharp rise in new infections, so that the number of new cases and deaths per day remains at a very high level and a turnaround in the fight against the pandemic has not yet occurred.
  • Accordingly, the current Federal Government/Länder decision of 13 December provides for the measures currently in force to be tightened from 16 December and extended until 10 January 2021.
  • The aim of the resolutions of the Federal Government and the Länder is to halt the infection momentum in Germany in the coming weeks by significantly reducing contacts in the population and to bring the number of new infections back down to the traceable level of less than 50 new infections per 100,000 inhabitants in a week.
  • The measures include in detail 
    1. Contacts with other people outside the members of one's own household are to be kept to an absolute minimum. Private meetings are limited to one's own household and one other household (max. 5 persons, plus children of up to 14 years of age). Limited exceptions are only permitted over the Christmas holidays (24 to 26 December). 
    2. Being in public is only permitted with members of one's own household and one other household, but in any case with a maximum of 10 persons. The consumption of alcoholic beverages in public spaces is prohibited from 16 December to 10 January.
    3. Request to refrain from non-essential private travel and visits - also of relatives. This also applies domestically and to supra-regional day-tourist excursions. Overnight accommodation within the country will only be made available for necessary and explicitly non-touristic purposes.
    4. Institutions and facilities that are to be allocated to leisure activities will remain closed. These include:
      • Theatres, operas, concert halls and similar institutions, trade fairs, cinemas, amusement parks and providers of leisure activities (indoors and outdoors), amusement arcades, casinos, betting offices and similar institutions, recreational and amateur sports activities with the exception of individual sports alone, in pairs or with one's own household on and in all public and private sports facilities, swimming pools and fun pools, saunas and thermal baths, fitness studios and similar institutions. Events that serve the purpose of entertainment remain prohibited. Professional sporting events can only take place without spectators.
      • Catering establishments as well as bars, clubs, discotheques, pubs and similar establishments shall remain closed. This does not include the delivery and collection of take-away food for consumption at home or the operation of canteens. 
      • Service businesses in the personal care sector such as cosmetic studios, massage practices, tattoo studios and similar businesses remain closed because physical proximity is essential in this sector. This now also applies to hairdressing salons. Medically necessary treatments, for example physio-, ergo- and logotherapies as well as podiatry/foot care, remain possible.
    5. Grocery shops, pick-up and delivery services, beverage markets, pharmacies and drugstores, baby stores, medical and health food stores, opticians and hearing aid acousticians will remain open as far as possible. Car and bicycle repair shops can also open, as can banks and savings banks, post offices, dry cleaners and launderettes. Newspapers, pet supplies and animal feed may continue to be sold. The sale of non-food products may be restricted.  
    6. All other shops will close from 16 December 2020 to 10 January 2021 for private purchases.
    7. When shopping, hygiene requirements must be met, access to the shop must be controlled and queues must be avoided. In general, there should be no more than one person per 10 sqm of sales area in an establishment with a sales area of up to 800 sqm. For larger shops of 800 sqm or more, an additional allowance of one person per 20 sqm of sales area applies. For shopping centres, the respective total sales area is to be applied.
    8. In addition, there is an obligation to wear a mouth-to-nose covering when shopping, also in front of retail shops and in car parks.
      Schools and kindergartens will generally remain closed during the above-mentioned period or the obligation to be present will be suspended. The Länder decide on the necessary protective measures. An appeal was made to employers to consider possibilities of company holidays or generous home office solutions for the above-mentioned period by 10 January. The start of the Christmas holidays will be brought forward nationwide to 19 December.
Last updated on December 18, 2020

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