Residential and Logistics will prove to be the most resilient sectors as Germany deals with the coronavirus crisis, experts agreed at Real Asset Media’s Germany Investment Briefing, which took place online this week with a record number of participants from 25 countries.
‘Our research shows that the most negative impact of Covid-19 will be seen in the hotel sector and also in retail and some parts of the office market,’ said Matti Schenk, Associate Research, Savills. ‘The good news is that some parts of the real estate market, notably logistics, residential and healthcare, will be resilient’.
Logistics is enjoying strong investor and tenant demand and benefiting from the increase in e-commerce during the lockdown. Residential continues to be in high demand across the country. ‘Residential is the most resilient asset class,’ said Tobias Schultheiß, Managing Partner, Blackbird Real Estate.
Some alternative sectors, like student housing and micro-living, have hit the pause button. ‘The operational part of the business is doing very well, but the investment side is a different story, we have slowed down transactional activity,’ said Rainer Nonnengässer, CEO, International Campus.
But it is a only a temporary setback, he said: ‘Short-stay and hospitality products will see a decline as people limit business travel, but micro-living products will continue to be in demand. As for student housing, the inflows of foreign students will resume and there will be shortages of supply. I’m sure we’ll see strong inflows in the sector in the next few months’.
Flexibility will be the key word in the office sector going forward, said Marcus Lemli, Chief Executive Officer of Savills Germany and Head of Investment Europe, Savills: ‘We are learning a lot from the biggest home working experiment that is going on at the moment. There will be a need for social distancing in offices and we already see tenants either reducing or reconfiguring space to make it more flexible’.
Mobility is another key word, as in future most people are likely to alternate between working from home and holding meetings in the office.
‘The office market will change after the crisis,’ said Schultheiß. ‘Home working will increase, but I don’t see a massive reduction in office space. People will still want to meet face to face’.
As banks are in cautious mode and foreign investors have limited access to the market, Germany is now a playground for domestic investors who don’t need to worry about financing and who can focus on the best assets in the most resilient sectors.
‘It is a great time for equity-rich players to dominate activity in core locations,’ said Lemli. ‘There are a lot of domestic players, pension funds, big institutions, insurance companies that are very active. We’ve even seen prices increases due to competition’.