High inflation, rising interest rates and the consequences of the Russian invasion of Ukraine shaped the year 2023. How has this affected the commercial real estate market? Peter Axmann The crisis really hit the real estate sector last year. Interest rates, which have roughly quadrupled since mid-2022, have played a major role in this. Many projects no longer paid off under these conditions, liquidity had to be injected in some cases and the transaction market almost came to a standstill. In 2022, there were already fewer transactions in Germany than in a normal year. In 2023, the number of commercial real estate transactions fell to a third of the previous year – a massive slump. At the same time, market prices declined by 10 to 25 percent.

The supply and demand sides were not matching up? PA That was the main problem in 2023. Investors were very cautious because they didn’t know whether prices would fall any further – and they had high interest rates to contend with. At the same time, sellers didn’t want to sell at the lower prices.

Are there segments of commercial real estate that have been particularly hard hit by the crisis while others have held their own? PA Large shopping centers are struggling. There is a structural crisis in this area anyway, as people’s shopping habits have changed. In 2023, the market for office space also came under pressure. Food-based retail, logistics properties and hotels have come through the crisis well so far. The pressure on residential real estate is also not as great because demand for apartments is high.

How important are criteria such as the right location and energy efficiency? PA Location was and is very important. However, this criterion no longer played such a major role during the real estate boom. That has changed again. Sustainability aspects have become more important, and energy efficiency is also a big issue. It is interesting to note that demand is highest for first-rate, modern office space in prime locations. Now that more employees are working from home, companies are in some cases renting less space, but in high-quality buildings instead. We even expect rents to rise in this top segment.