The springtime recovery of the German macro-economy is spilling over into the real estate industry. This is the upshot of the monthly King Sturge Real Estate Economy Index in its February survey among 1,000 relevant market players.
All of the sub-indices climbed to now high-water marks, leaving less and less room for further improvements. The poll-based Real Estate Climate rose from 141.8 to 144.6 index points. The driving force behind the February trend is the Investment Climate, which increased by 2.6% to 149.8 index points (up from 146.0 points the previous month).
"On the one hand, the mounting interest in Germany shown by many international investors is based on the country's sound macro-economic development, which contrasts favorably with many other key national economies, while on the other hand it is rooted in the then-as-now highly attractive real estate market whose risk-return profile continues to offer great opportunities," explained Sascha Hettrich, Managing Partner of King Sturge Deutschland.
The second sub-indicator of the Real Estate Climate the Rental Income manifests upward movement as well. At the moment, it stands at 139.4 index points, that is, 1.3% above last month's score of 137.7 points.
Commented Hettrich: "In the wake of a development on the commercial letting markets that is just as auspicious, it is quite evident that investors are ready to take on larger portfolio deals again, not least because the lending conditions of banks have slightly relaxed at a time when interest rates remain rather low."
Similarly, signs in all of the individual segments are set for growth. The Office Climate rose to 137.1 index points (previous month: 134.8), the Retail Climate to 142.2 points (previous month: 140.2), and the Industrial Climate to 138.1 points (previous month: 127.6). It is perfectly obvious that the segments are pulling level with each other. Remaining uncontested in the lead, the Residential Climate now stands at 166.5 points (up from 161.7 points the month before).
Macro-economy: When will it peak?
The Real Estate Economic Situation index, which reflects the statistic evaluation of ifo Business Climate, DAX, Dimax, and interest rates, climbed to a new all-time high of 209.7 index points (previous month: 209.0). At the same time, the growth pace slowed down to 0.4%.
Hettrich appraises the future trend of the real estate economic situation as follows: "We assume that the transaction volume for commercial real estate investments, which more than doubled year-on-year in 2010 anyway, will keep going up. That is, unless we are confronted with new shock waves on the financial market or new issues among those of Europe's countries that are currently rocked by sovereign debt crises."
Source: Flaskamp Ummen Communications