The Decline of the German Commercial Real Estate Market: Banks Brace for Default Risks

Since business with office real estate has declined significantly. Interested parties are waiting for price corrections that sellers do not yet want to accept.

Dhat the German real estate market is in the doldrums may have been known for some time. But the latest figures from various real estate service providers show how dramatically the market has collapsed, especially in the area of ​​commercial real estate. One of them is Cushman & Wakefield, according to which the transaction volume for German commercial real estate in the seven metropolises fell by 65 percent in the first half of the year compared to the same period last year to 9.8 billion euros. It was the weakest half-year since 2012, emphasized the real estate specialist.

For banks, as the most important financiers of office, retail and logistics properties, this means hardship. Because in an economic downturn that is currently expected, some of these loans are in danger of defaulting, especially since follow-up financing will not only become more expensive in view of the significantly higher interest rates, but some real estate projects will also become unprofitable.