Without climate change, the real estate market would presumably be the top topic in Germany. Almost every week, high purchase prices and barely affordable rents are reported. And the financial supervisory authorities are concerned about high valuations of residential and commercial real estate. With a view to negative bond yields, however, interest in the real estate market will not stop soon. The general conditions for the commercial real estate markets in the seven top German locations – Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart – have deteriorated. International crises are weighing on exports. The economy may just miss a recession.
The booming e-commerce sector is increasingly affecting the retail sector. However, the top locations are suffering less from a declining pedestrian frequency, which is adding to the shopping miles in many cities. Here, the retail sector can hold its own thanks to the growing buyer potential, rising population numbers and flourishing tourism. So far, there has been no significant decline in rents. The declining demand for space from textile retailers is being absorbed by restaurateurs, drugstores and supermarkets.
On the office market, on the other hand, rents are being driven up by the high demand for office space, which is due to high employment, and the scarcity of office space. However, the rise in rents is likely to slow. While the economic slowdown is weighing on demand, supply is gradually expanding as a result of the upturn in office construction. On the housing market, too, increasing completion figures are slowing the rise in first occupancy rents. In addition, high rents and a lack of apartments are hampering population growth. In this respect, market regulation works even without far-reaching government intervention. Uncertainty about further regulatory measures and the slowdown in rental dynamics should shape further developments on the housing market.