King Sturge German index sees mixed signals

The monthly King Sturge Real Estate Climate Index for Germany dropped from 52.9 points in March to 51.4 points after pushing upward from its historic low-point in December 2008 during the three opening months of this year. By contrast, the Real Estate Economic Situation rose for the first time since July 2008 from 118.8 to 121.9 points.

These are the findings of the April poll that King Sturge commissioned BulwienGesa, an independent market research company, to conduct among 1,000 market participants. The King Sturge Economy index is compiled monthly on the basis of two components, current business situation and current expectations. Unlike the Real Estate Climate Index, which is survey based, the Real Estate Economic Situation is based on hard economic data including the statistical evaluations of DAX, IFO, DIMAX, and prime interest rates. Whereas the Real Estate Climate indicates economic turning points in the real estate business, the RE Economic Situation permits conclusions regarding the current situation within the macroeconomic development context.

'The reticent mood in April documents the panel members’ awareness that a further substantial deterioration of the economic situation implies a serious risk potential for the real estate markets,' said Sascha Hettrich, Managing Partner of King Sturge Deutschland. Falling demand for office and retail floor space in particular has also impacted rental rates, he added. However, the Real Estate Economic Situation indicates there is reason to hope that a stable basis will form soon and that the markets will calm, Hettrich said. The time to invest is approaching and investors are becoming more willing to do so, he concluded.

The Office Climate dropped in April by 5.6% to 30.2 index points (compared to 32.0 points the previous month). A more critical view was also taken of retail-related real estate: The Retail Climate stood at 52.6 points (down from 55.5 points the previous month). 'By contrast, residential real estate continues to go against the trend,' Hettrich noted. The Residential Climate crossed back into the three-digit range, registering 102.4 points in April (previous month: 101.5 points). Hettrich: 'In the eyes of many investors, the development of residential real estate suggests long-term stability, promising a stable cash flow and with it a regular, secure income.'

King Sturge ranks among Europe’s largest independent, owner-operated real estate consultancies with more than 3,800 staff in 100 branch offices worldwide.