CPN - March 2009 - (Page 21) GERMANY INDUSTRY PULSE Brass Tacks Germany’s Slowdown May Yield Good Values By Paul Rosta N ow is the most sobering economic situation in firsthand memory. The federal government is spending hundreds of billions in a controversial bid to stabilize the financial system. Lenders are tightening policies for commercial real estate, if they are lending at all. And the retail market is taking a hit as worried consumers cut back on spending. In the investment arena, core office and industrial assets are drawing interest, but a shortage of debt is keeping a lid on sales. To a remarkable extent, this thumbnail sketch fits not only the United States but an influential trading partner and ally. Most estimates suggest that Germany’s economy will contract 2 percent in 2009. “The German economy has, of course, suffered because it is export led, and with the downturn in the world economy, strong export countries are suffering,” explained Jones Lang LaSalle Germany head of capital markets Marcus Lemli. That trend has potentially farreaching implications for Germany’s commercial real estate market, though decision makers should take into account other economic characteristics, as well. weighing a proSafety First “Typically, the German posal to nationalize (investment sales volume by risk category) real estate market Hypo Real Estate is much less volaBank AG temporarily, 2006 2007 tile compared with an extraordinary step other European marthat would be the 10% kets,” explained Olaf first state takeover of 18% Fortmann, managing a German bank since 26% 29% director for Behringer World War II. Harvard’s Germany Many of Geroffice. On the other many’s banks are 61% 56% hand, the market presresponding to the ents a considerably shaky state of the more bureaucratic financial system by business and governslowing commercial 2008 ment culture than do real estate lending some other Western to a trickle. That 9% European nations, and has helped send the Core the country’s commerreal estate investment cial real estate industry sales market into free Core-Plus/ 28% requires more detailed fall. Office sales, for Value-Add 63% knowledge of diverse example, plunged an local markets. estimated 70 percent Opportunistic Local real estate in 2008. professionals often One mitigating cite five of Germany’s factor is that borSource: Jones Lang LaSalle Germany largest cities—Berlin, rowers have opDusseldorf, Frankfurt, tions beyond the Hamburg and Munich—as its core As in the United States, many of troubled banks, which are primacommercial real estate markets. the German commercial real estate rily privately held.“The real ‘big’ And another 15 cities boast popu- industry’s challenges originated banks are (public) savings-andlations between 250,000 and with its troubled financial system. loans, and they are doing well,” 500,000, constituting solid sec- Last fall, the government hammered Fortmann noted. “Therefore, fiondary markets in office, industri- out an estimated 500 million-euro Visit www.cpnonline.com/international for more crossborder coverage. al or both. bank rescue plan. And it has been GLOBAL SNAPSHOT The Softer Side Office markets around the world experienced higher vacancy rates, lower leasing volumes, weak net absorption and little rental growth during the fourth quarter. Demand in hard-hit financial centers like New York City, London and Tokyo is particularly bleak as banks and other financial institutions go through massive job cuts. Market fundamentals are expected to continue to soften throughout 2009 in most markets around the world. A commercial real estate recovery will be at the mercy of the general economic turnaround. Mexico City Note: This diagram illustrates where Jones Lang LaSalle Inc. estimates each prime office market to be within its individual rental cycle as of the end of September 2008. Markets can move around the clock at different speeds and in different directions. The diagram is a convenient method of comparing the relative positions of markets in their rental cycle. The positions refer to prime face rental values and are not necessarily representative of investment or development market prospects. Source: Jones Lang LaSalle Inc. • www.joneslanglasalle.com www.cpnonline.com • March 2009 • COMMERCIAL PROPERTY NEWS 21 (Q4 2008 Class A/prime office rental rates) Toronto Paris, Frankfurt Beijing, Midtown New York City, Chicago Hong Kong Sydney, London Mumbai Tokyo Growth Accelerating Bottoming Out Growth Slowing Falling http://www.cpnonline.com/international http://www.joneslanglasalle.com http://www.cpnonline.com
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