The King Sturge Real Estate Economy Index reports another increase of almost every climatic indicator for November. As with the October survey, the polled real estate experts are reticent in their assessment of the market situation because the threat of possible backlashes is anything but checked. In November, the poll-based Real Estate Climate rose by 2.0%, from 78.2 to 79.8 index points.
The growth driver this time was the Rental Climate. Expectations vested in the rent and income development drove this index up by 2.7% to currently 68.6 points (compared to 66.8% the previous month). Unlike the earnings prospects, which continue to be eyed with a scepticism in face of threatening insolvencies and rent losses, the Investment Climate approached the threshold mark of 100 points reflecting a balanced sentiment ratio as it climbed from 90.0 points in October to 91.4 points in November. Serving as indicator of the investment and purchase opportunities, it thus reported but a slight growth of 1.5 percent this month. By contrast, the Real Estate Economic Situation Index, which is based on hard macro-economic facts, reported an increase up to 149.7 index points (previous month: 146.8). These are the findings of the November survey among roughly 1000 market players that the independent market research institute of BulwienGesa AG conducted on behalf of King Sturge.
"There is little reason to expect the economic crisis to end anytime soon," commented Sascha Hettrich, Managing Partner of King Sturge Deutschland. "With this in mind, the poll returns for the Office Climate assume a surprisingly positive significance. After all, the looming threat of job cuts made it reasonable to expect the gravest problems in this segment. For the time being though, the office letting markets remain relatively stable." Weighing in at 61.4 index points (up from 58.5 points the month before), the Office Climate boasted the steepest hike among the segment indicators. "It does not take a prophet to predict that companies will sign more new office leases next year than they have done this year, Hettrich went on to say. "Yet when taking the floor space into account that is vacated in the wake of consolidation measures, the net absorption in most German metropolises is likely to develop within very narrow limits indeed."
The Retail Climate, too, scored a modest gain, as it climbed from 78.2 to 80.5 points. Then again, the respondent real estate market players awarded residential real estate traditionally considered a safe haven a slightly poorer rating than in October. As a result, the Residential Climate slipped from 127.0 to 124.5 index points. It remains nonetheless the only real estate segment that received a majority of positive poll responses.
As far as hard facts go, the 2% rise of the Real Estate Economic Situation suggests a positively expansive economic development of the real estate business. Distilled from the stats of DAX, ifo, DIMAX, and interest rates, this indicator cleared the mark of 149.7 points (up from 146.8), thereby matching the level of late 2003, if you will.
"After more than a year of economic and financial crisis, we are still a far cry from a broad-based recovery of the markets. The outlook remains subdued with plenty of upward potential," Hettrich concluded.
Source: King Sturge
