« In October, the King Sturge Real Estate Economy Index has continued its upward trend at a steady, if slackening, pace compared to the previous month. The survey-based Real Estate Climate improved for the sixth consecutive time, now equalling 78.2 points (previous month: 75.6). When compared to the 17 percent hike in September, this increase by 3.4 percent documents the risk awareness of the polled real estate players. The upward trend of the Real Estate Climate relies primarily on the Investment Climate. At 90 index points, this indicator for purchase and investment decisions exceeds the September value of 84.4 points by 6.6 percent. In analogy to the evolving sentiment in the real estate industry, the Real Estate Economic Situation – which is based on macro-economic data – kept rising and now stands at 146.8 points (after 142.6 the previous month), an increase of 2.9 percent. This is the finding of the October poll that the independent consultancy firm of BulwienGesa AG conducted on behalf of King Sturge among 1,000 market participants.
“The real estate investment market is clearly surging,” said Sascha Hettrich, Managing Partner of King Sturge Deutschland. “While the foregoing months were defined by a process of probing the diverging price targets of buyers and sellers, we now seem to see a rapprochement in face of stabilising top yields. Higher transaction volumes suggest that the gap is narrowing and that we might expect another increase in turnover for the last quarter of the year.”
The commercial letting market, by contrast, reported a regressive development as particularly the letting market – unlike the investment market – lags behind the economic situation. The Rental Climate, a subcomponent of the Real Estate Climate mirroring the expectations vested in the performance of rents and returns, dropped slightly by 0.3 percent, from 67 to now 66.8 points. “A short-term shift in trend is rather unlikely as businesses continue to respond to the crisis by cutting costs and consolidating. The tender shoot of hope for the economy is hardly strong enough yet to stabilise the job markets.”
The real estate segments matched the reticent growth of the other climate indicators in October. The substantial hikes of the previous month have given way to modest gains in the lower single-digit range. With 58.5 points (up from 56.8 last month), the polled market players were once again most sceptical in regard to office real estate. Retail real estate, by contrast, showed the highest gain in sentiment at 5.5 percent, sending the Retail Climate from 74.1 up to now 78.2 points. That said, residential real estate remained the only segment that scored a majority of positive ratings with 127 index points (up from 124.3 points last month).
In keeping with the sobering mood among real estate players, the Real Estate Economic Situation – an index based in the statistical analysis of DAX, ifo, DIMAX, and interest rates – registered a modest, if stable, increase of 2.9 percent as it rose to now 146.8 points.
Hettrich commented: “Before this background, the sentiment reflected in this low-level improvement of the climate does match the actual economic situation – and yet it is indeed a sign of hope and of confidence in the German real estate market.”
About the King Sturge Real Estate Economy Index
Seeing itself in relation to the ifo business climate index, the ZEW economic expectations index, and the GfK consumer climate index, the King Sturge Economy index is compiled monthly on the basis of two components, namely current business situation and current expectations. Whereas the Real Estate Climate indicates economic turning points in the real estate business, the Real Estate Economic Situation – which reflects monthly macroeconomic stats such as the DAX, the ifo business climate index, the DIMAX, and the prime interest rates – permits conclusions regarding the current situation within the macroeconomic development context. On the website www.immokonjunktur.de, the panel members have the chance to state their opinions on the demand among investors and occupants, on rent rates and sales prices, as well as on macroeconomic parameters.
About King Sturge
King Sturge counts among Europe’s largest independent, owner-operated real estate consultancies. More than 3,800 staff in 100 branch offices worldwide provide a comprehensive service. In addition to financial experts, project developers, investors, and educational institutions, the company’s clients include national governments, as well as local and regional administrations. Moreover, King Sturge provides comprehensive expertise for market analyses. With offices in Frankfurt am Main and Berlin, King Sturge is committed to a sustainable growth course on the German service market» (CS della Società).
