GERMANY - Financing will be one of the major problems facing the German real estate market this year, according to Oliver Priggemeyer, chairman of IC Immobilien Holding.
Priggemeyer told IPE: "What I am worried about is the banks because they are cleaning out their balance sheets, which will make new financing more difficult.
"The effect this might have on the German real estate market cannot yet be fully assessed."
However, the real estate market remains attractive overall if only because of its stability, he said, citing a recent Ernst & Young survey where Germany was considered more attractive than any other European market by nearly all of it 540 respondents.
Priggemeyer stressed that alternative sources of financing such as pension funds, Pensionskassen, insurers, private equity and mezzanine funds would have to be tapped more frequently in future.
In the Ernst & Young survey, as much as 85% of respondents said Solvency II would drive more insurers into financing real estate deals, while 70% predicted banks would pull out of financing increasingly due to Basel III.
In other European countries, fewer investors saw insurers replacing banks as providers of financing, with around half of respondents agreeing to this statement in Belgium, the Netherlands, the UK, Poland, Switzerland, Spain, Russia, Sweden, Luxembourg and France.
According to Priggemeyer, this shifting landscape for financing will have a "significant effect" on the German real estate market, having an impact even on what types of deals are done.
He pointed out that there was currently almost no spread between risky and core real estate, which in turn had driven investors into an already overcrowded core sector.
He said the risk spread had to be re-established in order to attract investors, but that he was convinced that some - including some of his clients - would fail to find the necessary financing this year.
IC Immobilien Holding is a property and asset manager that last year won a mandate from real estate company Treveria, replacing Cushman & Wakefield as property manager for a 370-asset portfolio of German real estate worth around €1.4bn.
He noted that Treveria had chosen IC mainly due to its decentralised structure, ensuring proximity to all the major investment locations.
Priggemeyer added that specialisation away from the one-stop-shop principle in real estate management was a clear trend.
