Real Estate Climate highest since the collapse of Lehman Brothers (DE)

King Sturge Real Estate Economy Index: Real Estate Climate achieves 90 point peak, the highest since the collapse of Lehman Brothers.

Spring is in the air and on the minds of real estate professionals: The survey-based Real Estate Climate that reflects the industry sentiment reported a substantial 6.5% increase up to 90.0 index points (up from 84.6 points the previous month) in the March issue of the monthly King Sturge Real Estate Economy Index. Reaching the highest level seen since August 2008, the index is closing in on the threshold mark of 100 points that represents a balanced sentiment ratio. The increase is rooted in the 8.5% growth of the Investment Climate, which reached its highest level in the history of the survey by rising from 95.3 points the month before to now 103.4 index points. For the first time ever, the majority of participating market players rated the investment and purchase opportunities as positive. Analogously, the Rental Income, which is the second sub-indicator of the Real Estate Climate, achieved its highest rating since the collapse of Lehman Brothers in fall 2008, as it rose from 74.2 to 77.2 points. Moving in sync with the optimistic mood in the industry, the macroeconomic fact-based Real Estate Economic Situation persisted in its upward trend, and currently stands at 172.7 index points.

"So the burgeoning optimism among market players appears to be justified," observed Sascha Hettrich, Managing Partner of King Sturge Deutschland. "After all, the light at the end of tunnel is impossible to ignore anymore – even if we keep having to brace ourselves for further setbacks on the financial markets. We are not likely to see a swift upturn, least of all on the real estate investment market, which was particularly impacted by the bank trouble, nor on the tenant markets that tend to lag behind the general economy."

The upswing in sentiment among the respondent market players is also mirrored by the returns for the individual segments. The commercial climates for office and retail real estate, for instance, scored increases of nearly ten percent. Shooting up from 63.2 to 69.2 index points, the Office Climate rose by 9.5% in March. Yet while achieving its highest level since September 2008, the index continues to bring up the rear among the several segments. The Retail Climate, weighing in at 96.6 points (up from 88.3 the previous month), is steadily pushing toward the threshold of 100 points that suggests a stalemate between negative and positive sentiments. The most secure segment then as now is the residential one even if it suffered a marginal setback of 0.2% as it slipped from 132.2 last month back to 131.9 index points in March.

Finally, the Real Estate Economic Situation, which is based on the monthly statistical analysis of DAX, ifo, DIMAX, and interest rates, continued its growth trend of the foregoing months by rising from 168.7 to 172.7 points, and gaining 2.4% in the process. It has thereby pulled more or less even with the level of July 2008.

"Moreover, the fact that the transaction market is gathering speed after a long period of reticence does inspire hope," said Hettrich. "The parameters on the real estate investment market are admittedly slow to improve, but they are improving, and noticeably so. For whatever it's worth, there have already been three major transactions to the tune of €0.5 billion during the first quarter."

Source: King Sturge / Ummen Communications

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