According to the news of David SADLER from Globe World News Echo; After a decade of frenetic growth, the German commercial real estate market has entered a sharp correction phase. According to figures from BNP Paribas Real Estate, the volume of transactions in office real estate decreased by 76% in the first nine months of the year compared to the same period of the previous year, to about 4.6 billion euros. Jones Lang LaSalle, an American real estate services group, reported that transactions in Germany's seven largest cities fell by 36.3% over the same period. The office vacancy rate in German metropolises rose to 5.5% in the first nine months, up from just 4.7% in 2022 over the same period. Read also: Article dedicated to our subscribersOffice real estate in chaos amid rising rates and changing uses in Europe Several factors explain the trend. In addition to the slowdown in the economy since the beginning of 2023, there is also a credit restriction that puts pressure on business investment. However, above all, we are observing an overall decline in the demand for office space as a result of the proliferation of remote working since the Covid-19 pandemic. According to a recent survey by the Ifo institute, 61% of German companies currently allow their employees to work from home, especially in large groups. A quarter of employees take advantage of this opportunity on a regular basis. According to industry experts, this trend is expected to continue. However, due to the long-term nature of office lease contracts (usually ten years), the effects on the market are just beginning. "For the moment, bosses are still hesitant: some want to bring their employees back to the office, others are testing remote working solutions. Companies decide to reduce their space and settle in the most central locations of cities, which continue to be attractive, only where remote work is most established. Most of the time, they tend to stay on their premises and refuse to expand even as they grow. And no one is embarking on a new construction project," explains Christian Oberst, an expert on real estate issues at the Cologne Institute of Economics. Development of circles Conclusion: Transactions in the market are few in number, many areas have difficulty finding buyers if they are not well positioned. According to Bank DZ, commercial real estate purchase prices fell by 10% compared to mid-2022, while those of office real estate fell by 8%. Could this development lead to a financial crisis, as feared in some markets? "I think the risk is lower than in the United States," puts Mr. Oberst in perspective. There, prices drop by 20%, which is still far from what we observe in Germany. »
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