Cash is king

• With a transaction volume of around €2.8bn, April was the strongest month in terms of transaction volume on the German property investment market so far this year. However, we cannot speak of increasing momentum. With just under sixty transactions, we even registered the second-lowest figure since the start of the interest rate turnaround, undercut only by April last year (54). The fact that the volume was nevertheless so high is due to two major transactions: the sale of KaDeWe to the Central Group and the purchase of a Vonovia residential portfolio by the state of Berlin. They accounted for almost two thirds of the transaction volume.
  
  
• As unusual as the two transactions are in terms of their size in the current market environment, they are typical in other respects: for the sellers, they served to raise liquidity. In particular, sales of insolvent companies, as in the case of KaDeWe, which belonged to the Signa Group, have characterised the last few months like probably never before. At around €1.6bn, around a quarter of the total transaction volume this year was attributable to such insolvency sales or foreclosures. By comparison, in the years following the financial crisis, they reached a peak volume of just under €1.4bn or a share of only around 3%. By far the largest share of this year's volume is attributable to the two groups Centrum and Signa.

• As numerous properties are still in the hands of insolvent companies, insolvency sales are likely to continue to play a significant role, at least on the commercial property market. The willingness to sell is also likely to increase in at least three other areas: 1) At the end of 2023, the volume of non-performing commercial property loans held by German banks amounted to just under €14bn. Within a year, this figure has risen two and a half times and we expect this sharp increase to continue for some time to come and the banks concerned to intensify their workout and restructuring measures. 2) Many German open-ended funds will also be anxious to secure liquidity in view of continuing net cash outflows and will be prepared to sell accordingly. 3) In the next two and a half years, bonds issued by listed property companies with a nominal value of around €25bn will mature and need to be refinanced.
  
  
• The fact that more and more property owners need additional liquidity is good news for those who have enough dry powder. Their capital is likely to be in high demand in the coming months, whether for restructuring loans or as buyers of properties. For them, ‘cash is king’ is not just an empty phrase.

You can download all figures and the corresponding data here.