The current market situation in the real estate sector is not interpreted by PROQUADRAT – Real Estate Advisory as a classic crisis, but rather as a fundamental realignment of capital structures. While an increased number of insolvency filings from project developers, builders and portfolio holders have been observed over the past two years, there has been a parallel rise in transaction volumes and institutional investors' interest in German properties. PROQUADRAT's latest market analysis sheds light on these seemingly contradictory developments and derives concrete consequences for all industry players.
Michael Hutta, Managing Director of Hutta GmbH and founder of PROQUADRAT, emphasises that the market does not suffer from a lack of capital. Rather, the primary problem is a lack of transaction readiness. Capital today flows exclusively to where complete transparency is created, risks are adequately managed and projects are comprehensively prepared for a transaction. This statement underlines a paradigm shift in the requirements for real estate projects.
Key findings of the market analysis
The study identifies several key developments. Corporate insolvencies remain at a high level. One of the biggest challenges for many portfolio holders is follow-on financing. Banks are financing again, but are acting significantly more selectively than in the past. At the same time, private debt funds and institutional investors are noticeably gaining in importance. Revitalisations and ESG-related investments are becoming increasingly important in financing and investment decisions. Another observation is that large international investors are increasingly acquiring individual assets, credit positions and operational platforms instead of entire corporate groups.
According to PROQUADRAT's assessment, the location of a property is no longer the sole decisive factor for its financeability. Instead, the quality of the capital structure, the completeness of the documentation and the economic and technical future viability of an asset are moving to the forefront of the valuation. This marks a shift from pure location criteria to a more comprehensive property analysis.
New requirements for property owners
The market analysis indicates that financing is being scrutinised much more comprehensively today than just a few years ago. In addition to classic parameters such as market value, cash flow and collateral, additional factors are increasingly coming into focus. Michael Hutta explains that the lending decision is no longer based solely on the property. Rather, the focus is on professionalism in identifying, documenting and managing risks.
- —Follow-on financing and detailed capital expenditure plan
- —ESG and transformation strategies
- —Cost-to-complete for project developments
- —Comprehensive technical due diligence
- —Quality of the data basis
- —Mature letting and exit strategies
- —Detailed liquidity planning
- —Structured corporate relationships
