INVESTMENT MARKET

World-famous brands, a strong medium-sized economy and outstanding research institutions are at home in Lower Saxony's state capital and Hanover region. Over 50,000 companies with around 525,000 employees make Hannover the most important economic area in Lower Saxony. The positive development in recent years has led to sustained demand for real estate in all submarkets and has consolidated and expanded Hannover's position as the most important location after the seven major A cities in Germany. Hannover offers attractive investment opportunities and attracts national and international investors who want to invest in valuable locations.

MARKET SENTIMENT AND TRENDS

The exceptionally long upswing on the German investment market, which has seen falling yields and rising investment volumes in Hanover since 2010, appears to have come to a halt for the time being. Although a turnaround in interest rates and thus a possible correction on the real estate markets has been expected for some time, the momentum with which this transformation is currently taking place is surprising. The investment market environment has changed drastically in just a few months. Corresponding adjustment processes and the associated uncertainties are resulting in low transaction activity, particularly in B locations such as Hanover.

The investment pressure from many investors remains high. In addition, regional office space take-up has been comparatively stable so far, with logistics properties even reporting record take-up in 2021. The prospects for rental growth in the office and logistics submarkets have recently even improved for the top properties. No matter which submarket you look at: None of the current core projects are ignoring the issue of sustainability, the ESG objectives are being taken into account accordingly and are therefore generally meeting investor demand perfectly.

According to regional market players, the significant decline in completed transactions is primarily due to the drifting apart of price expectations between the buying and selling sides. A lack of willingness to pay is currently being met with high purchase price expectations, and both sides are only making little or very slow progress towards each other. As long as this gap does not close, only a few transactions will be successfully concluded in the long term. In view of the small number of ongoing and newly initiated sales processes, the transaction volume will also be comparatively low at the end of the year.

Short- and long-term market developments are clearly leaving their mark: interest rates, inflation, energy prices and the consequences of the war in Ukraine, the ongoing coronavirus pandemic and the continuing climate crisis are unsettling many potential investors, who are withdrawing from market observation. The escalating crises and challenges currently seem too uncertain and unpredictable. As soon as the trends in the aforementioned developments become clearer and firmer, it can be expected that buyers will also actively return to the regional market and price expectations on both sides will adjust accordingly. Distress sales of core projects are therefore not to be expected. However, certain project developments could see changes in use and new valuations if the mix of rising construction costs, interest rates and tightening exit factors means that calculations based on previous assumptions no longer work out.