German office market outlook remains vulnerable, PBB index shows

Deutsche Pfandbriefbank AG

20/02/2025 11:08

* 
      PBB index shows slight improvement 
    

        * 
      Index remains below growth threshold
    

        * 
      ECB rate hikes have impacted Germany's real estate market
    

        * 
      Commerzbank's new lease indicates some market confidence
    

  
    By Tom Sims
       FRANKFURT, Feb 20 (Reuters) - 
    Germany's office market remains depressed, with any recovery
in the coming months seen as vulnerable to further economic
weakness, according to an index by the property lender Deutsche
Pfandbriefbank  PBBG.DE  (PBB) released on Thursday.
  
    The bank's quarterly index tracking the office market rose
to minus 1.86 in the fourth quarter of last year, up slightly
from minus 1.92 in the third quarter.
    Despite the gains, the index is only marginally above its
lows earlier in 2024 and remains well below the zero level that
separates growth from contraction in the sector.
    The commercial real estate market in Europe's largest
economy has been in crisis for the past three years after the
European Central Bank embarked on a series of interest rate
increases to fight rampant inflation. Recent rate cuts have
helped stabilise the market, but the outlook remains bleak.
 
    "Any recovery on the investment markets over the next few
quarters will only be moderate and very crisis prone," PBB said.
    A weak economy means that "cautious behaviour on the office
markets will continue in the short term."
    The troubles have hit Germany's financial capital of
Frankfurt. Last year, the owner of a prominent skyscraper that
is home to Germany's central bank and a top asset manager filed
for bankruptcy.  
    But in a more recent sign of confidence in the market,
Germany's Commerzbank signed a 15-year rental contract for a new
high-rise office that is currently under construction.

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German commercial property prices drop    https://www.reuters.com/graphics/GERMANY-PROPERTY/lbpgjqnnovq/chart.png
Deals in Germany's property market    https://www.reuters.com/graphics/GERMANY-PROPERTY/lbpgjdddzvq/chart.png
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 (Reporting by Tom Sims; Editing by Rachna Uppal)
 ((Tom.Sims@thomsonreuters.com; +49 30 220 133 645))