Macroeconomic Context

Germany enters 2025 facing persistent economic challenges, with growth projections at a modest 0,5%. This stagnation reflects structural issues that have been building over the years, exacerbated by energy supply constraints, global disruptions, and a slower pace of innovation. On the global competitiveness, Europe faces stiff competition from USA and China, both of which have leverage significant industrial strategies and technological advancements. For Europe to thrive, fostering innovation and reducing dependency on external supply chains will be essential.

Real Estate Market

The real estate market is adapting to changing dynamics. Prime assets and residential assets are recovering, while secondary properties face hurdles due to ESG compliance and muted demand. Residential and logistics assets stand out as winners, driven by demographic shifts and supply constraints. Office properties meanwhile are focused on prime locations with office conversions presenting creative opportunities. Land scarcity and high costs remain challenges, but strategic approaches will be key to unlocking value.

Investment Outlook 

The real estate investment market is entering a critical phase in 2025, marked by both pressures and opportunities. The era of relying on interest rate speculation has ended. Investors are refocusing on core principles. This renewed attention to fundamentals will help stabilize the market after years of volatility. Cap rates are beginning to show signs of normalization. However, the recovery is uneven, and opportunities will favor those with a deep understanding of asset-specific dynamics:

• Family offices are poised to play a larger role in acquisitions, however constraints on equity availibilty from parent companies may limit their reach in today's stagnation. 

• Institutionals investors, on the other hand, remain cautious, focusing on stabilizing their portfolio rather than expanding.

• Anglo-Saxon private equity funds, buoyed by strong returns in the U.S., are entering European markets with high return expectations. Navigating these discrepancies will require innovative deal structures and a realistic approach to valuations.