International investors are skirting German property deals as they dial back on a market in its worst crisis in a generation, potentially deepening the scars on Europe’s biggest economy.
Foreign buyers accounted for 35% of purchases of commercial real estate in the first quarter, data from BNP Paribas Real Estate shows. That is less than in any year since 2013 and comes against the backdrop of a 70% plunge in sales volumes from levels before the 2020-2021 pandemic.
The grim figures coincide with a debate about whether Germany is once again “the sick man of Europe” — a label it was given in late 1990s as it struggled with economic stagnation and high unemployment. The nation worked years to shake that label off, but it has re-emerged as Germany weans itself off Russian energy, gets tangled in bureaucracy and sees far-right politicians gaining in the polls.
Kurt Zech, one of Germany’s biggest developers, warns the market will keep struggling until foreign investors return. “The Americans have to come back. When the Blackstones, the Blackrocks, the Morgan Stanley’s of this world and Carlyle and Apollo buy in the German market, that will be noticed and then we will all know that we have now reached the bottom,” Zech told international media.
For years, low interest rates, cheap energy and a strong economy sustained a boom across the German property sector, which broadly contributes 730 billion euro ($793.51 billion) a year to the nation’s economy, or roughly a fifth of Germany’s output.
