The corona crisis has so far caused significant changes in almost all areas of life and the real estate market has not been spared from the crisis either.
The real estate market in the corona crisis
The corona pandemic caused significant changes and the real estate market also experienced a significant cut. Overall, the German real estate market has so far been booming despite increasing demand, higher prices and steadily rising rents. But the various areas in particular show that the market is still affected by the Corona crisis, because so far nothing has really changed in the area of housing and logistics, but the changes in the area of offices and retail are the bigger.
Private and commercial residential real estate
The impression is created as if owners of owner-occupied properties as well as capital investors could emerge from the crisis as winners in the long term. The reason for this is the stable demand, because while the popularity of owner-occupied residential properties initially appeared to be declining, demand could exceed supply in the long term as the financing conditions remain favorable. Commercial real estate, on the other hand, is not as good as the effects of the corona pandemic mean that a slight increase in the risk of rent default is to be expected. At the same time, increasing fluctuation cannot be expected, as living space is very scarce, especially in cities. How the situation for office properties will develop clearly depends on the future tenants. The Deutsche Anlage-Immobilien Verbund, known as DAVE for short, is currently recommending so-called package sales of new apartments. The main reason for this recommendation is that the payment modalities only have to be negotiated once, so that the risk initially remains manageable. In addition, construction and follow-up financing can be presented more easily, as there are no rental price brakes for new buildings.
Even before the Corona crisis, German retail was under great pressure. But now the area even seems to be facing a profound change in the entire structure, because the retail sector is forced to reposition itself. During the second lockdown at the latest, a large number of stores not only had to close temporarily, but were also forced not to open the doors at all for the time being. Sales in January were 3.9 percent lower than in the previous month, as the Federal Statistical Office announced. Adjusted for price, there was even a minus of 4.5 percent, which follows a record drop of 9.1 percent in December. As a result, the image of German city centers is now characterized by empty shop rows.
Only local suppliers can see themselves as winners, because they even hold up against online retail. Many local suppliers have made a virtue out of necessity by integrating and even expanding the delivery service into their respective business models. And it is also conceivable that these models will establish themselves in Germany after the pandemic. This development has also resulted in an increasing popularity of food anchored properties. Grocers are considered tenants with good credit ratings and the grocery trade has generally proven itself as a stable investment object in the retail sector and is causing increasing investor interest in supermarkets and food-anchored properties. A current study by JLL and Union Investment entitled “The European Grocery Real Estate Market” shows that the market for real estate in the food retail sector will probably continue to develop positively in 2020 after an investment volume of 6.7 billion euros in 2020. Accordingly, investments in real estate in the European grocery trade have remained constant at around 4.5 billion euros per year over the past six years. In the past year, however, the volume increased by more than 40 percent compared to the previous year and remained at around 6.7 billion euros.
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