In February, the King Sturge Real Estate Economy Index, which is surveyed monthly, resumed its growth course from last year, but did so with a slowed sense of momentum, after climate ratings had briefly dipped at the beginning of the year The poll-based Real Estate Climate rose by 2.0 percent in February, from 82.9 to 84.6 index points. This is due above all to the 6.9-percent growth of the Rental Income, which rose to 74.2 index points in February (compared to 69.4 points last month).
Irrespective of the enhanced expectations regarding floor space demand and rent rate development, the 8.1 percent loss of the previous month was not balanced. The Investment Climate, indicator for investment and purchase opportunities and the second sub-index of the Real Estate Climate, checked its upward trend of last year and dropped slightly by 1.9 percent to a current level of 95.3 points (compared to 97.2 the previous month). These are the findings of the February survey among roughly 1,000 market players.
"Positive only in a reticent sense, the returns of the February survey for the King Sturge Real Estate Economy Index suggest once again that market players remain aware of the considerable threats that persist on the financial markets," said Sascha Hettrich, the Managing Partner of King Sturge Deutschland. "With a view to the loan risks on the US commercial real estate market as well as to the uncertainties on the currency and loan markets, euphoria is indeed uncalled for. Yet despite the reticence on the investor side, we are beginning to feel that foreign investors are taking an increasing interest in the German market. The UK and US investors have returned, and are joined by new leads from Asia, the Arab world, and elsewhere."
The subdued sentiment on the real estate market is mirrored by the moderate growth manifested by all of the segment climates. The fastest growing index in February was the Office Climate, as it rose by 3.4 percent to 63.2 index points (up from 61.1 points in January). That said, the increase failed to make up for the significant 8.7 percent dip in January. The retail segment scored 88.3 index points (up from 87.2 the month before), which represents its highest rating since the onset of the financial in fall of 2008. The boom cycle of residential real estate as most popular asset class continued in February: The Residential Climate rose by 1.1 percent from 130.8 to 132.2 index points, thereby exceeding the level it had at the start of the survey in January 2008.
February's Real Estate Economic Situation, an index distilled from the macroeconomic data of Dax, Dimax, ifo, and interest rates, puts the timid rise in sentiment among the market players on a hard-fact basis. Having gained 5.5 percent (168.7 index points, up from 159,9 points the month before), the Real Estate Economic Situation reported one of the biggest increases of the past two years. "Aside from the macroeconomic data, which is reassuring, we have noticed that the prospects of success even for larger deals are better than they were last year," commented Hettrich. "The gap between the diverging price targets on the buyer and seller side, respectively still vast last year appears to be closing gradually, causing the market conditions to look more realistic and transaction volumes to become larger in turn."
Source: King Sturge
