German real estate professionals divided on recovery timeline

At Expo Real in Munich, over 650 real estate professionals participated in Berlin Hyp's annual "Trendbarometer" survey, providing insights into the real estate transaction market.

Berlin Hyp Trend Barometer

Key findings revealed a divided industry regarding the market's recovery timeline, with 44% anticipating an upturn in 2024, while 36% are looking toward 2027 or later. Despite sluggish overall activity, the success rate for transactions was better than expected: 32% of respondents completed 40-60% of their deals, and another 31% completed 20-40%. Only 5% achieved a success rate above 80%.
Current market activity is primarily driven by family offices (45%) seeking long-term investments and foreign investors (33%) drawn to Germany's stable economic environment. Private investors (22%) and domestic institutional investors (20%) play a lesser role, with the public sector (8%) having the least involvement, though this may change.
Regarding financing, non-bank options are gaining prominence due to perceived restrictions in traditional bank lending. Equity instruments like private equity (44%) and credit funds (43%) are particularly strong, followed by mezzanine capital (28%). These alternative financing methods are expected to become even more crucial amidst ongoing refinancing waves.
In terms of asset classes, 47% of respondents see residential construction, despite its current low activity, as having the greatest potential for an economic upturn, likely due to stable rental income. Logistics remained a strong second at 23%, while the office sector (9%) and retail (8% for food, 4% for non-food) lagged significantly, indicating a slower anticipated recovery for these segments.
Sascha Klaus, chair of the Board of Management at Berlin Hyp and member of the Board of Managing Directors at LBBW, commented: "The transaction market is the most important indicator of the state of the real estate sector. The results of our survey at Expo Real show where the key issues currently lie. The really big transactions are still lacking. At the same time, however, we also see the opportunities that continue to exist in the residential and logistics sectors, for example. I would also like to advocate for the office sector. After all, the shift to sustainability and the increasing rediscovery of the office as an anchor point of corporate culture certainly offer opportunities here and there."