In a real estate landscape weighed by higher financing costs, renewable energy solutions are coming to the fore, according to German lender Berlin Hyp, a subsidiary of Stuttgart-based Landesbank LBBW.
The latest Berlin Hyp Trendbarometer survey suggests that the slowdown in the real estate economy will drive energy transformation and ultimately curb price increases in construction and material costs.
The majority of the investors surveyed expect the sector to have recovered from the effects of the energy crisis and the war in Ukraine within three years, at latest. More than 430 real estate experts participated in the new research.
WHile some 70% of survey participants said they believed that rising financing costs will have a significant impact on the real estate industry in the coming years, 58% of respondents thought that increasing energy costs are the greatest challenge, followed by supply chain issues at 28% and staff shortages at 23%.
Other factors were seen as less crucial, such as general geopolitical risks (23%), the availability of financing (19%) and the availability of space (19%), the regulation of taxonomy compliance (13%) the achievement of taxonomy compliance (13%) and a declining demand for real estate (9%).
According to Berlin Hyp, the results show that the industry is on the verge of a major turning point and is being challenged to adapt to the changing environment.
Said Sascha Klaus, chair of the board of management of Berlin Hyp: 'The real estate financing market was very stable until the geopolitical upheavals, however since the beginning of the year, the interest burden in commercial real estate financing has been increasing significantly.
'As a result, we are seeing transactions being postponed or recalculated. However, a large part of the real estate industry is well positioned, it has become more modern, more resilient and more innovative.'
Opportunity knocks
Survey respondents also suggested that the slowdown in the real estate economy would also present opportunities.
Nearly half of all survey respondents (48%) said they believed that the slowdown in the real estate economy would drive energy transformation.
Added Klaus: 'We are convinced that right now, a commitment to energy transformation is of great importance. Whether it’s in new construction or in existing buildings, the energy crisis will fuel the trend towards energy optimisation.
'In principle, there is enormous energy-saving potential across the portfolio, and real estate with poor energy efficiency will be more difficult to market in the future. This is why we cannot let up on our efforts right now, as this would be falling short of the present challenges in our view.;
Around 39% of respondents said they expected that the price increase for material and construction costs would slow down and 35% said they assumed that there would be more free capacities at construction and trade companies again.
Regarding the opportunities that the slowdown in the real estate economy may present, 32% said they believed that this would lead to a stronger focus on quality, whereas 28% said they saw the opportunities in accelerated structural change.
Some 18% felt this would aid diversification of the portfolio due to favourable entry opportunities, with just 4% of survey respondents seeing no upsides.
In terms of the recovery time frame for the real estate economy, 62% of the survey respondents said they expected the real estate industry to recover after three years at the latest. Of these, 32% said they considered a time frame of two to three years to be realistic, with 23% forecasting one to two years.
Yet 37% of respondents predicted a longer time frame of recovery. 21% of survey participants suggested it might take three to five years, with 10% saying that a period of five to ten years was more realistic.
