REALX: Germany, ‘the most resilient market in Europe’

Germany has proved to be the most resilient market in Europe during the Covid-19 crisis, confirming its status as a safe haven, experts agreed at the Market Snapshot: Germany briefing which was held yesterday at RealX Global, the first virtual trade fair organised by Real Asset Media.

‘We’ve seen a slowdown in activity on both the investment and the leasing side, but less so than in other European countries,’ said Mark Holz, group head of research, Corestate Capital Group. ‘Investment volumes have declined by 35% in EU but only by 11% in Germany. We’ve done way better than we could have expected at the beginning of the health crisis earlier this year’.

Part of the reason for Germany’s success has been the strength of its domestic investor base, which stepped in when foreign capital had to stay away.

‘We have seen the German investors come back,’ said Thomas Veith, Partner, Real Estate, PwC Germany. ‘Where before it was Middle Eastern and Asian capital doing deals, now it’s domestic and Continental European investors dominating the market’.

Foreign investors ‘wait and see’

Foreign investors took a wait-and-see attitude. ‘Our international contacts kept in touch and showed interest but they were not looking to buy’, said Tobias Schultheiß, Founder & Managing Partner, Blackbird Real Estate. ‘I’ve only done transactions with German buyers, who have been willing to pay pre-crisis prices or even higher prices’.

The continuing demand, especially for core and core-plus assets, has meant that prices have stayed high. ‘We have seen no significant discounts,’ said Veith.

The other reasons for Germany’s resilience said Holz, are its reputation as a transparent and liquid market, the strong performance of the property sector over the last decade, its long-held reputation as a safe haven and, last but not least, the way the country has dealt relatively well with the Covid-19 pandemic.

Demand for residential unaffected by crisis

‘Germany’s strong economy and its safe haven status are leading more people to want to live in its cities,’ said Till McCourt, Head of Research, Ziegert Group. ‘This leads the demand for residential, a sector which hasn’t been affected by the crisis at all, partly because there was no oversupply but quite the opposite’.

Demand for all asset classes has picked up in the last few weeks and is set to accelerate further in Q4, said Schultheiß: ‘My impression is that many investors took a break during the crisis, but now they want to go back to spending money. There’s a strong pipeline on the sell side, so I believe there will be a rally between now and the end of the year’.