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Office market Q1 2023

The German office markets posted a weak Q1 2023 as expected. Take-up in Germany’s top 8 locations of Berlin, Düsseldorf, Essen, Frankfurt, Hamburg, Cologne, Leipzig and Munich totalled 621,000 sqm in Q1, reflecting a decrease of more than 20% compared to the previous-year result and the 10-year average. The economic slowdown in the wake of the war in Ukraine, which could already be seen in lower leasing activity and take-up at the end of 2022, could still be felt on the office markets in Q1 2023. Uncertainty around the economy, a looming recession and gas shortages in the winter led many companies to postpone their investment decisions. Leasing activity on the German office markets is likely to pick up in the coming months in the wake of a recovering German economy. This will probably not translate into significantly higher take-up in Q2 but should boost results in the second half of the year.

Commercial investment market Q1 2023

The commercial investment market started the year with the lowest transaction volume posted since 2010. Investors only poured around €5.1bn into German commercial real estate and development sites. These results cannot truly be compared with Q1 2022’s record €19.7bn (-74.0% yoy) due to the funda-mental changes in the conditions on the financial and occupier markets, although performance did come in well below average from a long-term perspective. We have, however, been seeing signs of activity on the markets picking up momentum as the year pro-gresses. The number of requests for pitch presentations has increased significantly, which indicates that the price correction process is picking up speed. It is hard to say how many potential deals will be closed this year as it is still difficult to sound out the market.

The investment volume in certified green buildings in Germany in 2022 remains at a very high level of approximately €11.2 billion. Although the volume, like the investment market as a whole, declined slightly in absolute terms compared to the previous year, the relative share of certified assets in the investment market rose to an all-time high of 30.6 %.

In a challenging and uncertain situation, certifications are perceived as a reliable signal for ESG and sustainability. ESG criteria have achieved a very high status in asset management and investment decisions in a short period of time with the new regulatory framework of the Taxonomy and Disclosure Regulation of the EU.

Logistics market Q1 2023

Overall, the German logistics markets got off to a moderate start in 2023. In the first three months of the year, a take-up of 1.25 million m² (including owner-occupiers) was registered. As expected, the brilliant record result from the previous year, which included the Tesla construction start in Grünheide near Berlin with 327,000 m² of space, was clearly missed by almost 46 %. The current result is also weak in a long-term comparison, as the ten-year average of almost 1.5 million m² was not reached (-16 %). However, it is very likely that take-up will pick up again, especially in the second half of the year, so that the pressure on rental levels is likely to remain, also against the background of continuing high construction costs. Prime and average rents are likely to continue to rise, not least in view of the increasing ESG requirements in the logistics sector.

Retail market 2022/2023

In 2022, many important learnings have emerged on the retail letting market that were triggered by the transformation processes in the wake of the Corona crisis: Retail take-up in city centre locations has now settled at a post-Covid level, prime rents are showing signs of stabilising again after two years in a downward spiral, and footfall has not only fully recovered since spring, but has even exceeded its previous year's levels, usually by a significant amount (page 1).

Even if it would be too far-reaching to conclude that the first quarter of 2023 has seen a trend reversal from smaller to large shop units, the letting momentum for large lettings on the nationwide retail market in city centre locations was unusually high at the start of the year. A high number of Galeria properties which are falling vacant, the continued existence of larger vacancies due to the effects of the Corona crisis, but also restructuring and relocation efforts on the part of renowned chain stores are only the most important factors here which ensured a noticeable market revival in the large-scale segment (page 2).

Residential Dashboard 2022

The course of 2022 so far has been characterised by different, very dynamic developments. On the one hand, with the ongoing transition of the Corona pandemic into an endemic, the usual movement is slowly returning to society and the housing markets. On the other hand, the Russian war of aggression and the strong increase in inflation created a new challenging market environment. Rising SWAP rates and worsening financing conditions have caused an overall slowdown in market dynamics. Overall, the housing markets are thus in a phase of consolidation. On average, rents and prices are currently stabilising. However, there are clear local differences.

Hotel Dashboard 2022

Given the outlook of further interest rate increases and a slowing economy, the hotel investment market has to face various uncertainties at the beginning of 2023. In addition, the diverging price expectations of sellers and potential buyers continue to restrain investment activities. Nevertheless, the tailwind on the operator side is getting noticeably stronger given the quick recovery in the number of overnight stays and especially the performance key indicators. This improves the predictability of possible investments, allowing market activity to pick up considerably again by the middle of the year.

The Hotel Dashboard from BNP Paribas Real Estate provides an overview of the development of hotel investment and performance indicators in the various top markets in Germany.

BNPPRE Tourism analyser

On the German hotel market, after the impactful Corona years of 2020 and 2021, all key performance indicators suggest that the recovery of tourism in Germany has gained significant momentum, especially since summer 2022. With a total of around 349 million overnight stays between January and the end of September, the figures for 2021 as a whole (around 310 million guests) had already been outperformed by almost 13% before the start of the fourth quarter. On a monthly basis, the number of overnight stays has been on a par with the level of 2019 since August due to the renewed demand impulses in city and business tourism as well as among guests from abroad. An analysis by BNP Paribas Real Estate on the most important developments and trends in the German hotel market shows how the Corona crisis has affected the general conditions in the hospitality industry and influenced travel behaviour in Germany.