Germany’s real estate market can look forward to a rebound this year after a collapse in transaction volumes in 2023, according to a new report by BNP Paribas.
The numbers are stark: deals in commercial real estate plunged to €23.2 billion last year, compared to €54.1 billion the previous year, a fall of 57% and a return to the weak levels last seen after the financial crisis of 2008.
Transaction volumes fell across the board, in all geographies and all asset classes. However, things picked up in the last few months of 2023, and Q4 figures were the highest since 2022.
The pickup in activity at the end of the year points to a more favourable year ahead, with a 20% rise in investment volumes forecast by BNP Paribas. As in 2023, activity is likely to accelerate towards the end of the year and an increase of 20% is “quite realistic”, said Marcus Zorn, CEO, BNP Paribas Real Estate Germany.
This optimistic outlook will be good news for market professionals after a year in which the steep rise in interest rates triggered a property market slump. Weak market sentiment was also hit by weak economic growth.
The engine of European growth has been spluttering, and this – coming after a decade-long boom and a strong belief in ‘lower for longer’ – has hit sentiment as well as well as volumes.
One of the issues in the market has been the wide gap between sellers’ and buyers’ price expectations, which has led to the slowdown in sales. However, the gap might be narrowing as realism sets in and sellers accept prospective buyers’ lower offers.
Another factor is the need for debt refinancing, which could persuade companies to put more assets on the market. One example is Vonovia, Germany’s largest residential landlord, that sold €3.7 billion in assets in 2023 in order to push ahead with its debt reduction.
Rolf Buch, CEO, has said that Vonovia intends to continue selling commercial assets in its portfolio this year in order to reduce its debt burden and is targeting another €3 billion in sales. The DAX-listed group will have to repay around €4.5 billion in loans and maturing bonds in 2025.