"We're moving to the hinterland"
"We're moving to the hinterland"
On the surface, new construction activity in the seven A-cities is stable, as shown by the 15th Real Estate Developers Study. In detail, however, there are major shifts. The office segment is growing only listlessly, more and more apartments are being built by public developers, and traditional project developers are moving into the surrounding areas.
The Real Estate Developers Study 2021 shows: Project developments in the seven A-cities are almost unchanged compared with the previous year. Project areas declined only marginally by minus 0.1% in 2020. This is also due to the fact that a phase of stagnation at a high level had already occurred before the Corona crisis. Based on more than 5,200 individual projects, the structure and volume of the project development market were analyzed and evaluated on a city-by-city basis. The types of use considered were office, residential, retail and hotel.
Once again, investor development projects, i.e. developments for owner-occupation and portfolio maintenance, stabilized the market development with +1.3 million sqm (+6.3%), even more so than in the last analysis year. This is particularly true of apartments, but also offices. Hotels and retail are again losing project space; hotels, as expected, very significantly.
By contrast, the "classic" trading developments, i.e. developments for the purpose of sale, have again lost project space volume, at -1.3 million sqm (-4.7%), with a continuing upward trend. A high decline was already measured in the last study. Now, the new value exceeds this by more than double, also because planning was postponed or only very hesitantly newly created at all.
Residential: Traditional project developers pull back
The Corona crisis had only a minor impact on developments in the residential segment. Overall, the downward trend of the previous year was halted and remained stable. However, the question of who is building and who is planning shows major differences: as in the previous year, more and more project developers are withdrawing directly from the A-cities. In Trading Development, project areas fell by -7.0% or -1.13 million sqm. By contrast, investor developers were exceptionally active: their project areas grew very significantly by +1.2 million sqm or +14.7%. Rental housing construction is not only attractive to the private sector, but is also a concern for the public sector. In Berlin in particular, the state-owned housing companies are extremely active - the top 10 project developers include Degewo, HOWOGE and Land Berlin.
In the residential segment in particular, developments that have nothing to do with the Corona crisis are also influencing the project developer market. Regulatory measures or the discussions about them - such as the mandatory share for publicly subsidized housing, the rent cap, the introduction of a CO2 tax for buildings - are causing project developers to rethink their strategies in some cases.
Offices: Dampers yes, disruption no
New construction of increasingly scarce office space led to a renaissance of new, modern office buildings in cities. But the Corona crisis put a slight damper on the office segment. After the partly very low vacancy rates in the seven German metropolises even allowed speculative project starts (without pre-letting), the type of office use was now first questioned along the keyword "home office". Some office space users postponed new leases for the time being for economic reasons alone, project plans were postponed into the future and new projects were not started. As a result, project space in the office segment increased by only 1.2% (179,000 sqm) this year, significantly less than in previous years. Thus, the average increase in office project space from 2017 to 2020 was 14.7% p.a.. The decline was present in both trading developments (2.0% compared with 12.7% p.a. previously) and investor developments (0.3% compared with 17.2% p.a.).
One thing is clear: offices will have to be built or extensively refurbished in the coming years as well. In most German A-cities, vacancy rates are very low. But the location question is currently more open again for offices. Both city and satellite offices are likely to shape our working world in the future.
Corona crisis reinforces trend toward new construction in surrounding areas
In the largely resilient housing market, the Corona crisis is reinforcing existing trends. For some time now, supply and demand have been moving away from the A-cities and into the surrounding areas as well as into B- and C-cities. In almost every case, housing is cheaper there and, with a now established home office ratio, a greater distance to the place of work is also acceptable. We want to get to the bottom of these patterns in German project development even more in the future and are considerably expanding the spectrum of our analysis of project developments as early as 2021.
The trend toward the surrounding area has already been observed for several years. Older analyses by bulwiengesa showed even before 2020 that project developers are not scaling back their project volume, but rather shifting their spatial activity. In order to obtain figures on this, some of the top trading developers (see figure) in the residential segment also reported their projects located in the surrounding areas of the A-cities for the current study.
To the residential project areas in the A-cities alone (26.6 million sqm), these seven trading developers add another 1.5 million sqm of residential project areas. That would be almost 6% of the current trading development space in the A-cities. From the point of view of the companies themselves, an outstanding 31% of the residential project areas in the surrounding areas of the A-cities are thus being created. For individual companies, this ratio is even more clearly shifted toward the surrounding area. It is almost certain that companies other than the seven shown are active in the suburban market at a similarly high level.
Note: Information on how to order the project developer study as well as further material can be found on the bulwiengesa website.
Contact person: Ellen Heinrich, Project Manager, heinrich [at] bulwiengesa.de