‘Team glass half-full’ prevails on prospects for German market

Senior lenders and alternative providers have played a complementary and essential role in the German market this year, delegates heard at Real Asset Media’s Trends 2025: Germany Investment briefing, which took place recently in Frankfurt and was hosted by Ashurst.

“Every German bank is still open for business, some more aggressively than others,” said Assem El Alami, head of international real estate finance, Berlin Hyp. “But there is pressure on lenders’ loan books and regulatory requirements that is squeezing us, so it is easier for private debt to provide solutions. They are complementary to senior lenders.”

It has been a low transaction environment in Germany, with lower valuations but investors reluctant to commit.

“We are totally complementary to banks, because we step in where banks don’t go,” said Guido Gerstner, head of real estate debt and managing director, Prime Capital. “The criteria for banks are different from what we require. We’re less regulated so we can be more creative, differentiate ourselves from competitors and find new niches.”

The difficulties the German market has experienced have led to an increase in interest from some kinds of buyers. “We have seen opportunistic investors giving capital to debt funds,” said Filip Kurkowski, partner, Ashurst. “They come mainly from the US and the UK, but also from Spain. These are new market participants that are entering Germany with that focus on opportunistic deals.”

In some cases these players had been eyeing the market for a while, waiting for the right moment to act.

“There is new capital in the market, but also old capital that had been watching from the sidelines for years and now that prices have come down they make their move,” said Inga Schwarz, head of research, BNP Paribas Real Estate Consult. “Foreign capital, especially family offices, seem to spot the opportunities before German players do, because they tend to see the glass half empty.”

The crisis may have led to the permanent loss of some investors, said El Alami: “I think Europe has slipped down the rankings on US and Asian investors’ priority list. I am worried that some capital will not find its way back to the European market or to the German market, as our economy is stagnating.”

This year has been tricky for investors but positive for banks and for lawyers, delegates heard.

“For the banking industry, the last couple of years have been smoother than feared and we had good margins”, said El Alami. “Next year there will be more competition in our market, because investment activity will pick up to a relatively low but better level and Germany is slowly picking up. In my view 2025 will be a moderately good year, but it could go the other way, especially if US President Trump’s policies fuel inflation.”

There are many elements of risk in geopolitics and, of course, Germany is facing elections in February so uncertainty will dominate the start of the year. As the year progresses experts agreed that an improvement is on the cards. With interest rates going down and yields levelling out, the German market should pick up some momentum.

“2024 has been good for lawyers but I hope that 2025 will have a different focus, with more new transactions and less restructurings,” said Kurkowski. There are already positive signs that will happen, as in the last couple of months there have been more rescue financing, he added, and more opportunistic deals.

“There will be more deals being done, in fact they are being negotiated now because the gap between buyers’ and sellers’ expectations has narrowed,” said Schwarz. “We do believe in an uptick in activity. We are team glass half-full.”