Germany's 'decade of real estate' now over

In a wide-ranging thought piece on the German commercial real estate market, the FT Alphaville column announces its view that the decade of real estate (a moniker it attributes to JLL researchers) is over. But it wasn't killed by the coronavirus crisis, argues its author. The end of the market was clear already in the opening months of 2020, with JLL writing that the country's Big 7 cities reporting the lowest level of office take-up in since 2014. The article also cites a RICS survey from the end of 2019 that found that 85 percent of investors believed prices were expensive. What the pandemic has managed to do is speed up the shift towards a post-boom market and leave open only the question of how hard the crash is going to be. On that note, most observers appear to expect the impact to be less severe than it was during the Great Recession, in part because the risks of widescale defaults on rents and loans and the ensuring fire sales are reduced this time around. LTV rates are lower, in part because as FT Alphaville points out the Pfandbrief banks that did much of the lending aren't allowed to go over 60 percent. That gives investors a good deal more leeway for property values to fall before their lenders would have to realize a loss.