As of: February 17, 2024, 11:38 a.m
By: Bona Hyun
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Press
Split
Problems in the US commercial real estate market are unsettling Germany.
Many offices there are empty too.
The situation is unlikely to improve any time soon.
Berlin – Is Europe threatened with a real estate crisis?
The market for office properties is currently suffering in particular.
Rising interest rates, inflation and falling real estate prices are possible reasons for the dramatic development.
Germany is also affected.
According to BNP Paribas Real Estate, there are currently around six million square meters of vacant office space nationwide.
Problems in the office real estate market are unsettling Europe and Germany
The demand for office space has also fallen massively in Germany.
In 2023, according to data from BNP Paribas Real Estate, the investment volume for office properties in Germany totaled just under six billion euros - a decrease of 73 percent compared to 2022. This is reported by Handelsblatt
.
Turbulence in the US real estate market is also unsettling Germany.
© Rico THUMSER / imago
Jens Tolckmitt, Managing Director of the Association of German Pfandbrief Banks (VDP), does not expect commercial property prices to stabilize.
Deka board member Matthias Danne also recently predicted according to the
Handelsblatt
: “I think that real estate prices will fall even further in 2024 because the new situation has not yet been accepted and implemented everywhere.”
Is there a risk of a crisis on the European office market?
USA often “pioneer for developments in Europe”
The European Central Bank has long been concerned about the downturn in the commercial real estate markets in the euro area.
But the supervisors believe the problems are manageable.
According to the European office rent index from international real estate service provider Jones Lang LaSalle (JLL), take-up of space in Europe fell to 8.7 million square meters in 2023 - a decrease of 17 percent compared to the previous year.
“The American real estate markets often serve as a pioneer for developments in Europe,” the
Handelsblatt
quoted Miguel Rodriguez Thielen, who is responsible for the office leasing business in Germany at the real estate service provider JLL.
The trend towards home offices could have a major impact on developments in the European commercial real estate market.
Because many employees come to the office less often, companies need less office space and are moving to smaller buildings.
According to the
Handelsblatt
, some experts therefore fear that the market will never return to its old level.
Concern about financial crisis: USA is struggling with difficulties in the real estate market
In the USA, however, the situation on the commercial real estate market brings back memories of the 2008/2009 financial crisis.
The changed use of real estate and rising interest rates have “meant that hardly any buyers are willing to buy larger commercial properties,” says Chris-Oliver Schickentanz from Capitell AG to the
Tagesschau.
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Since the corona pandemic, many offices have been empty, especially in the USA, and at the same time interest rates have risen sharply.
In the USA, the vacancy rate climbed to 19.6 percent in the fourth quarter of last year, according to data from the analysis firm Moody's - making it higher than ever before in the survey.
Metropolises such as Los Angeles, San Francisco and Philadelphia are particularly hard hit.
Germany has already felt the consequences of the American market situation.
Deutsche Pfandbriefbank – a credit institution that specializes in financing commercial real estate – is particularly affected.
According to the
Tagesspiegel
, the financial institution drastically increased its risk provisions in the third and fourth quarters because of its loans for American office properties and was in the red in the fourth quarter.
The institute had only just met its profit forecast for the full year, which had only been reduced in November.
(bohy)