Coronavirus

Corona crisis: German inner cities threaten hard times

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The Corona crisis does not hit every branch of the economy with the same force. In order to find out which industries were hit particularly hard and which got off rather lightly, the Council of Real Estate Wise Men prepared an appraisal at the request of the Central Real Estate Committee (ZIA).

This special report shows that the hotel and restaurant industry and retail trade are suffering particularly badly from the consequences of the crisis, while the consequences for the housing market and office property are rather manageable. The biggest beneficiaries of the crisis are logistics real estate.

The biggest losers in the crisis

80 percent of German retail businesses had to close their doors during the lockdown, according to the report that is available to the “Handelsblatt”. However, in order to secure their livelihoods, many of the retail entrepreneurs had taken out loans, aid measures and grants. Around half of the companies would have suspended rent payments for a certain period of time – this was also felt by the property owners. To make matters worse, the buying mood would not have returned to its old form even after the lockdowns had been overcome. Therefore, hard times are looming for German inner cities.

The extent to which the retail sector was affected by the crisis would only become apparent after an important test: the Christmas business.

The hotel and hospitality industry got off even worse, according to the report. In view of the almost complete loss of income, the state rescue measures could hardly prevent an impending wave of insolvencies, according to the “Handelsblatt” in the report.

On the other hand, a different picture emerges on the market for office and residential real estate. This is largely unaffected by the Corona crisis, according to the report. Above all, short-time working allowances and other measures have ensured that rent payments from apartment tenants practically never ceased.

There are two opposing developments on the office property market. More companies are relying on models such as home office, which reduces the need for office space. At the same time, the employees who are still in the office need more space for hygiene reasons.

The winners of the crisis

One industry that grew significantly during the crisis was that of logistics real estate. With an investment volume in the first half of 2020, the industry was around 3.9 billion euros, 57 percent above the level of the previous year, according to the “Handelsblatt”.

In the lockdown, many people would have preferred to buy their products online than go to the respective stores. Coupled with companies that want to rely on secure supply chains even after the crisis, the Council of Real Estate Wise Men sees this as the reason for the growth.

The rents in warehouse, logistics and corporate real estate would continue to rise in the next few years, which is why the wise men cite this sector as a future-proof investment.

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