Investors face difficult decisions at the moment. COVID-19 has caused economic cutbacks in a number of sectors around the world, forcing investors to adjust their strategies. Even the real estate market has not been spared these jitters. As the “Active Capital Report” of international real estate consultancy Knight Frank shows, investment activities on the real estate market have taken a nosedive. Worldwide, transaction volumes dropped from 109.6 billion euros to 91.6 million euros during the first half-year of 2020 (source: www.knightfrank.co.uk). Germany’s real estate market, by contrast, has proven a popular investment destination.
Notwithstanding the global setbacks, the market in Germany has largely remained stable, and was also among the first to recover from the consequences of the ongoing crisis. With their potential to qualify as low-risk yet profitable core investments, German properties have demonstrated their continued appeal for cross-border investors. As a result, the investment volume actually grew during the second quarter of 2020 – and it did so at a pace of 27 percent. Compared to the prior-year period, when the total had been 13.1 billion US dollars, the cross-border and domestic investment volume added up to 16.6 billion US dollars (source: www.haufe.de).
This makes Germany one of the most important spots on the global real estate market. The bulk of these investments is being poured into the asset class residential. Given a 66-percent increase from 5.1 billion US dollars to 8.4 billion US dollars in this sector, multi-tenant properties, retirement homes and student halls of residence as well as social housing developments have turned out to be popular targets for global investors.
Due to the resilience and the stability of the German market, Knight Frank believes that Germany’s metropolises will be permanently part of cross-border investor portfolios. The market’s robustness is explained by various key factors. For one thing, it is of the essence to ensure sustained tenant demand and rent payments. These prerequisites are most obviously in place in the innovation-driven metropolises, which continue to attract new residents and manage to retain them.
On top of that, sustainability has turned out to be a factor that helps to make real estate more resilient. A slew of legislative amendments for the benefit of the environment have been initiated lately. Sustainable buildings either meet the requirements already or else benefit from funding allowances. In addition, the approach increasingly matches the expectations that tenants have in a property today (source: www.knightfrank.co.uk).
The resilience of the German real estate market has caused it to remain one of the most popular investment destinations among global players. The forecast that Knight Frank ventured for the year to come seems to back this trajectory: Within the global context, Germany’s real estate market was ranked third among the leading investment destinations by the real estate consultancy.