The year 2020 will to go down in history as the year of the Covid-19 pandemic – a year of unparalleled upheaval in our society, the economy and the real estate sector. It is becoming more and more apparent that the worldwide struggle of governments and the population to bring the pandemic under control is slowly but surely succeeding. Currently, around 25% in Germany have been vaccinated against Corona at least once and 7.4% have been fully vaccinated. Current forecasts assume that herd immunization and thus complete protection will be achieved by mid-August.In the real estate markets the question at the start of 2021 for investors and occupiers is how the market has performed to date and above all what the future will bring, particularly with regard to the sustainability of real estate investments and the safe return of workers to the workplace. As in previous years, the demand for office real estate will continue to run high in 2021 as well since the fundamentals, especially for core properties, hold the promise of stable income and further capital appreciation. This is also evidenced by our 2021 Investor Intentions Survey, according to which 54% and 59% of German and European investors surveyed by CBRE not only intend to invest significantly more in 2021 than in the corona year 2020, but also continue to name office real estate as the preferred asset class for investment. Contemporary office space that, along with flexible and hybrid ways of working, caters more strongly to the needs and requirements of workers will attract even greater attention. This includes facilitating the exchange and transfer of experience and knowledge, fostering team spirit and supporting collaboration to the greatest extent possible at a central physical location. 

At the same time, the pandemic has accelerated the process of structural change in retail that must rise to meet the additional challenges from digitalization while availing itself of the opportunities. Offline and online offerings are imperative for stationary retail if inner cities are to remain vibrant centers for shopping and for meeting.

The logistics sector is benefiting from this structural change – in Germany additionally in the context of realigning global supply chains and the resultant trend toward re- and near shoring and is enjoying growing interest on the part of investors. Demand for investment in multi-family housing, and increasingly also in alternative, non-cyclical asset classes such as healthcare and social real estate, along with data centers, is holding steady at a high level – and will continue to head north in 2021. Data centers are not only benefiting from the digitalization wave permeating all sectors (watch-word: Industry 4.0) and the associated (almost) unbridled growth in data volumes, but also increasingly from the structural change accelerated by the Covid-19 pandemic, which affects how we work, consume, use services and spend our leisure time. In future, these trends will be embedded even more firmly in sustainability aspects. In this context, ESG is not simply on-trend, but also a logical response to one of the most important sectors of the economy with regard to climate-neutral new build projects, forward-looking, low-emission repurposing, or the upgrading of existing stock, as well as the question of green rental agreements and investment vehicles.

The times in which we live are certainly challenging but also exciting. As so often, exigent shocks triggered by crises also offer countless opportunities, especially as the market remains flooded with liquidity looking for risk-adjusted investment options. The German real estate market will yet again live up to its reputation as a relatively safe investment haven.

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Last updated on April 29, 2021

 

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