Investment
Investmentmarkt
The real estate market is currently showing signs of uncertainty. High financing costs and rising construction prices are putting a strain on property developers. Ho- wever, ESG-compliant new buildings are less affected by these factors. EHL remains optimistic and sees potential for major transactions over the coming year.
Nevertheless, the real estate market is currently showing clear signs of uncertainty and reluctance among investors, especially compared to the years before the Ukraine crisis. The impact of interest rate hikes has significantly influenced the market, with due diligence, approval procedures and financing transactions taking longer as a result.
Property developers are the ones most acutely affected by the economic challen- ges. High financing costs, rising construc- tion prices and falling exit prices are forcing many to temporarily suspend construction projects. In the medium term, this could lead to a shortage of urgently required office space in attractive locations.
At the same time, ESG-compliant new buildings are less affected by the market distortion. By contrast, they are subject to lower price adjustments due to their compliance with current EU sustainability requirements. Older properties, on the other hand, are struggling with significant price markdowns as they often no longer meet investors’ rising expectations in terms of sustainability.
Prime yields on office properties in European comparison (in %)
8 %
8.0
7.0
6 %
6,.0
5.5
5.0
5.0
4 %
4.5
4.4
4.4
4.25
4.25
4.20
4.15
2 %
0 %
Source: EHL Market Research | BNP Paribas Real Estate | Q2 2024
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Office Market Report
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