Market Overview: The Real Estate Market and the Corona Crisis

How is the German real estate market doing after more than 12 months of Corona?

A year ago, we took a look at the IZ Research transaction figures to see how Corona was affecting the German rental and investment market. In the meantime, another year has passed amid the pandemic and we can now reveal a more comprehensive picture.

Overview of the Rental and Investment Markets

Transaktionen_2021_en
IZ Research 2021

Based on the registered transactions, it can be seen that the measures to contain the corona virus have had a varying effect on the rental and investment market. The first lockdown from March to April 2020 led to a slowdown in business activity for many real estate players.

However, with the first easing of lockdown restrictions at the beginning of May 2020, the industry emerged from the initial shock and in the course of the summer players returned to their past performance.

Investment Market

gehandelte-Assetklassen_en
IZ Research 2021

The investment market returned to almost the same level as before the Corona crisis. Low interest rates, high liquidity and the resulting investment pressure also fuelled real estate trading during the pandemic. Particularly high demand was observed over the course of the year for the asset class “Special Real Estate”. This asset class includes logistics properties, which benefited from the significant increase in online trade and therefore became increasingly attractive.
Retail properties focusing on “groceries/drugstores” and ” hardware stores” also delivered stable revenues.

The losers among the traded asset classes however are hotel properties, which are becoming less and less attractive for investors due to the travel and accommodation ban and could develop into a niche market again if closures continue for a longer period of time.

Rental Market

Vermietung-nach-Nutzungsarten_en
IZ Research 2021

Rental activity fluctuated considerably due to the constant on-off lockdown mode during the second and third waves of the virus. Overall, a decline in rental activity can be observed *.

However, this also reflects the focus on certain types of use already observed in the investment market; above all, logistics, food retail and drugstores. The top 10 tenants (all rentals in the last 12 months) include Amazon (logistics) Edeka, REWE, Kaufland, Aldi and Rossmann (retail).

* This statement refers purely to the number of registered rentals and not to the take-up in m².

Our Conclusion

Even before the lockdown at the beginning of 2020, fewer rentals and sales were observed. This could be attributed to two factors:

On the one hand, the markets were already unsettled at the end of 2019 with the outbreak of the pandemic and the subsequent restrictions in China. The first mass lockdown had an impact on China’s economy and ultimately on the global economy. In addition, the first Corona virus case was already reported in Germany at the beginning of January.

On the other hand, several economic policy factors, such as the open trade dispute between the USA and China, the imminent Brexit at the end of January 2020 and the uncertainty about the outcome of the US elections in autumn 2020, caused uncertainty and restraint on the real estate markets.

Nevertheless, the German real estate market is still considered a safe haven for investors, which is illustrated by the further development until today.

Despite all fears of a systemic crisis similar to the one in 2008, the figures show that the frequency of transactions is currently still at a higher level than in the years directly after the crisis of 2008. This is because the initial conditions are structurally different today than in the previous cycles.

However, as in previous real estate cycles, we will only be able to assess the actual effects after a certain amount of time has elapsed.

We will continue to monitor the figures and keep you informed on further developments.

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