Germany’s economy is on the verge of a strong recovery thanks to the successful vaccination campaign. We anticipate that that overall economic output measured against real gross domestic product will have regained its pre-crisis level before the end of the third quarter of 2021. At the start of August 2021, around 54% of the entire population had been fully vaccinated. 

With summer on its way, nature is coming into full bloom, as is society at large that, in all its facets, is increasingly finding its way back to some sort of normality after months of restrictions. This is tangible not only from the footfall in the city centers that is steadily moving towards levels seen before COVID-19 across the whole of Germany, but also from the labor market that, after the upheavals in 2020, is rapidly picking up momentum. Companies in the industrial sector are hiring more people again, and businesses in the pandemic-stricken services industry and retail are shedding their reluctance and creating new jobs.  The reverse side of the coin that is this gratifying development has put the issue of skills shortage on the agenda again. The desperate search for qualified staff is on, not only in the hyper-techno-logical industry but also in the IT sector and in health care. 

In the real estate market that lags the general economic trend, the signs also point to recovery. Demand from domestic and international investors for German real estate is only being held in check by the ongoing focus on core and core plus investments coinciding with limited supply. 

Office, multifamily and logistics properties are especially highly sought after, and short supply is reflected in yields falling further at mid-year 2021. The retail segment is also seeing user and investor confidence in the non-food segment growing. 

The first rays of sun are also reported in the hotel segment. Vacationing at home should result in hotel operators seeing higher occupancy rates on the coast, in the mountains and with city tourism. 

Core assets in top locations continue to appeal to conservative institutional investors and command high prices. Social and health-care properties are also more popular, although demand here, increasingly fueled by German institutional investors as well, also outstrips supply.

A trend set to become even more important in the future is the potential ESG con-formity of investments, particularly with regard to energy-related aspects. Investors are currently looking much more closely at contemporary, certified buildings and developments, which is compounding excess demand in this segment and leading to rising prices. Investors should nevertheless take heed not to generalize when looking at existing stock as they may otherwise run the risk of passing up opportu-nities. A closer look shows that many properties are already in better shape today in terms of energy standards than is assumed from the year when they were built. Alternatively, they can be sustainably positioned anyway as part of imminent lifecycle measures.

Given the corporate takeovers and platform deals announced, along with the deals in the sales pipeline, the transaction volume on Germany’s real estate investment market may see the record figure achieved in 2019 considerably outperformed in the full year 2021. Germany has therefore reinforced its position as the world’s second largest real estate investment market that is considered one of the safest investment havens due to its robust fundamental data, ongoing recovery in the occupier markets and the high quality of its real estate.

This summer read is designed to give you a current insight into the developments anticipated in the individual real estate sectors. We are looking forward to engaging in intensive dialog with you. We are at your disposal with our experienced expert team at any time.

Last update: 05.08.2021

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