Cologne investment market: After a record quarter in Q1, the entire investment industry is hitting the pause button for now.
After the year started with a transaction volume of around €762 million in the first quarter of 2022 (first quarter of 2021: €235 million), setting a new record for the Cologne investment market, disillusionment set in without much of a lead-up.
In the second quarter of 2022, only a handful of transactions with a total volume of just €65 million were recorded. The largest transaction was the sale of the Hopper Hotel in Cologne's Altstadt Süd district. Looking at the quarter alone, this represents an unprecedented low. However, thanks to the above-average performance in the first three months, the half-year result can still be described as good. With a transaction volume of €827 million, the half-year is on a par with the previous year (first half of 2021: €831 million).
After more than two years of pandemic, we were all longing for our "old normal." The pandemic has left its mark and will continue to do so. The previously unbroken high demand for real estate investments in Germany seemed unending. The industry had grown accustomed to the comfortable interest rate environment and everyone was working well together.
In March 2022, the mood at MIPIM was still exuberant. The war in Ukraine had already begun, but everyone hoped and wished for a short conflict for all involved. But everything turned out differently. The war is raging uncontrollably, the human tragedies are beyond words, and the global economy and energy sector are being held hostage by Russia. Since the fighting in the Baltic states began, all prices have skyrocketed—especially energy costs. Added to this are shortages and an uncertain outlook for the future.
"We've had many crises before. However, the challenges posed by this crisis are more long-lasting and also more wide-ranging. The investment industry needs to reorganize itself first. Rising construction costs, a lack of availability, high land prices, and continuing interest rate hikes are causing many investors to take a wait-and-see approach for the time being," says Markus Larbig, managing director of Larbig & Mortag, adding:
"It feels like not only has the music stopped and the lights come on, but the first guests have left the dance floor. At the moment, no one really wants to get up and dance. However, we assume that investors have simply taken an early summer break and will soon be back in action."
"Nevertheless, we remain confident that by the end of the third quarter, most investors will have regained their focus, become more courageous, and transaction volumes will pick up again. Investment activity will then take place at a new level. We have already seen the first purchase price adjustments after some purchase processes were completely halted," adds Florian Langer, head of the investment department at Larbig & Mortag.
The tone will certainly be more subdued, and the dancing will perhaps be more like a tentative swaying.
Please remain confident and always remember: "Et hät noch emmer joot jejange" (Everything will be fine).
