Interest rate hikes and ESG requirements have substantially changed the real estate market. "The market had to digest that," says Matthias Leube, CEO and Head of Capital Markets at the real estate service provider Colliers Germany, in an interview with Börsen-Zeitung. Now that the last interest rate hike is likely to have occurred, investors have planning certainty.

The large capital inflows in recent years have led to overallocation in real estate for many investors. Leube now sees renewed activity in the industrial and logistics transaction market. "There are once again two, three, four, or five offers with prices in the range that sellers want to see."

Sufficient capital ready for investment is available, particularly in the residential sector. "Residential real estate is unfortunately so attractive because there is too little construction. Therefore, we will see substantial rent growth in the coming years." Leube expects the establishment of new residential platforms, even from investors who were previously only active in the commercial sector.

Regarding offices, Leube sees two trends: New Work and ESG. The increased use of home offices is expected to reduce the need for office space by about one-fifth. "However, there is significant demand for properties in central locations where rents will also rise."

In contrast, typical B-locations in major cities are facing challenges, especially if they are older. A market for offices in B- and C-cities has developed much faster than in top locations. "Both regional and national investors have invested." Nevertheless, the overall transaction volume has "substantially decreased."

Leube predicts some insolvencies at the property level and on certain platforms that now need (much more expensive) refinancing. He does not anticipate large defaults with the sale of financings at significant discounts. "This hope arises in every crisis. But it will be disappointed once again this time." The transaction market will only witness significant improvement when interest rates "move in a different direction", indicating a decline. "But even now, more and more funds are being raised."

When asked how Colliers had responded to the changing market situation, the CEO of Colliers Germany notes: "We have adapted our organization and reduced staff. At the same time, we have also invested." This applies to digitization and, in particular, the topic of ESG. "I am personally committed to allowing the real estate industry to determine its own needs. I believe this aspect is somewhat neglected."

Leube is the patron of the Innovation Radar of the Central Real Estate Committee ZIA, which seeks the best innovations in the areas of new construction, CO2 reduction in existing buildings, circular economy, affordable housing, and livable cities & regions this year. The awards will be presented at the upcoming Expo Real.

Regarding the ESG topic, Leube emphasizes that every property must have a path towards ESG. "Buyers carefully consider how to make the properties ESG-compliant. This is now an integral part of due diligence." However, there are still no standards. "At the moment, everyone determines how the renovations should be done themselves."

Regarding the mood at Expo Real, which begins on October 4th in Munich, Leube states: "Every crisis has its opportunities. Many institutional investors are not active yet. Nonetheless, many sellers have already adapted to the market conditions." This means that capital-rich investors could make significant moves.

"We will now witness the start of opportunities. In the past three to four months, we have observed that previously inactive sources of capital have become active again. This applies to both national and international players."