Thomas Olek is CEO and major shareholder of Publity AG, a listed company specializing in commercial real estate
Personal-Financial.com: Mr. Olek, your real estate company Publity works closely with investors from Korea. What attracts Koreans to invest in Germany?
THOMAS OLEK: We do indeed work closely with Asian investors, including from South Korea. They often replace British and US investors who are currently taking profits in the German office market and getting out. The South Koreans currently see Germany as an extremely safe country, in which rents will continue to be paid in the future. There are only a few super-rich families there whose employees in Germany invest in investments. You save a lot and achieve single-digit returns.
According to reports in the industry media, you recently received a three-digit million euro financing commitment from the South Korean financial service provider Hana Financial Group for investments in German office properties, including the purchase of the Centurion building near the Frankfurt trade fair.
I can confirm that we are in talks with Hana Financial Group.
In which cities do Koreans buy real estate?
This is remarkable, actually only Frankfurt and Munich are in demand. There are two reasons for this: these are the two international airports in Germany, and Koreans therefore know these two cities best. Another reason is that Korean investors like to invest in large corporations. Munich and Frankfurt simply have the most Dax companies and office properties used accordingly. Frankfurt is also very popular for settlements and currently ranks ahead of London.
Which of the big cities in Germany are avoided?
Berlin and Stuttgart. Berlin is seen as politically chaotic, just think of the airport and the interference in the residential property market. And Stuttgart is a car city. One is currently avoiding the auto industry.
Are there real estate deals at all in the times of the corona pandemic? I could imagine that you can’t even get an appointment with a broker.
In fact, 90 to 95 percent of the market fell asleep. If you want to sell, you won’t find a service provider, some brokers are on short-time work. Banks are also more reluctant to finance because the risks have increased. And if so, then the interest rates are significantly higher. When buying Centurion, the interest rate was 2.6 percent, before Corona it would have been only 1.0 percent. Basically, however, we do not need to worry in the large office area over 100 million euros. It may also be possible to tie portfolios there. The small-volume area outside the metropolises, however, is increasingly following the economy.
And how does it look in the top locations?
Large-volume office investments in A locations tend to be even more interesting. If interest rates remain low, the prices of properties that are rented securely and on a long-term basis could even increase. This opens up opportunities for increasing value. Rents will tend to be constant in a balancing market. There should currently be good purchasing opportunities for liquid investors, since investors with other liquidity pressures or perhaps just other future expectations are separating from real estate.
They sound very confident about the future of offices. Does anyone even need it? All in all, home office works quite well, as the past few weeks have shown.
Basically, we don’t have a real estate or financial crisis, but a virus crisis. There is a lot of money in circulation, which ensures that further investments are made. Offices are also following the economy, but the segment will quickly become more attractive again, also because we went into the crisis with very low vacancies and there were hardly any new ones so far. In the future, companies will also take contagion effects into account when looking for land. Corona is the end of the open plan office. Contagion-proof offices, however, require significantly more space per employee. Video conferences also replace travel rather than office work. Video is also less suitable for building trust. When video is widely accepted from an environmental and health perspective, it increases the presence of the office.
Or the employees stay in the home office, from there video conferences via Skype, teams or zoom also work quite well.
The involuntary large-scale home office attempt during the pandemic is more likely to contribute to the disillusionment. As long as people are around, you need offices. Your own desk far outweighs the rental cost advantages of home office regulations in the battle for talent through loyalty gains. The working atmosphere also suffers. Project staff with full pressure will be sharper in tone than the accepted “thumb twists” in the home office. In families, there is an efficiency risk with the home office. Singles, on the other hand, are happy to be able to work efficiently in peace.
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