German real estate deals pick up amid slow recovery for offices

WHILE a recovery in German commercial real estate deals is picking up, helped by buyer interest in industrial and logistics properties, sluggish demand continues to sour investor appetite for office properties, according to Jones Lang LaSalle Inc.

Overall deal volumes climbed to 15.7 billion euros (S$22.9 billion) in the first half of 2024, up 10 per cent from a year earlier, the real estate brokerage said in a report on Monday (Jul 8). The main driver of the increase was warehouse-property deals, which gained almost 60 per cent from the year-earlier period, while office purchases stagnated, JLL said.

Although occupancy rates are slowly stabilising, investors are still hesitant to put money into offices, JLL said, as the post-pandemic trend toward remote work reduces demand for office space. Investor confidence is further damped by negative news surrounding some properties, such as the loan default linked to Trianon tower in Frankfurt, JLL said.

For the rest of the year, the brokerage expects a “tough catch-up process,” with its forecast for full-year transactions unchanged at 40 billion euros. Real estate isn’t currently the focus of many institutional investors, JLL said. The share of portfolio transactions fell 19 per cent to 4.2 billion euros compared with the first half of 2023, while individual transactions grew 26 per cent to 11.5 billion euros.

“What we have been seeing in the United States since the beginning of the year is now also becoming noticeable in Germany: the market is slowly returning to growth,” Konstantin Kortmann, country leader for JLL Germany, said in the report. BLOOMBERG