Saturday, 15 March 2025
In an encouraging shift, the real estate market sentiment for residential property has brightened, with investor optimism edging higher compared to the previous year. Institutional investors, asset managers, and other stakeholders expressed growing confidence in apartment buildings and condominiums, with expectations set for price increases in these segments over the next year, according to the 2024 sentiment survey by RUECKERCONSULT, commissioned by HIH Invest Real Estate and Ypsilon Steuerberatungsgesellschaft. The survey, drawing responses from 161 real estate market players, highlights a year-over-year improvement in market sentiment while remaining slightly in negative territory overall.
Market Mood Warms, Led by Residential and Logistics Sectors
The overall sentiment index posted a score of -0.06 on a scale from -3 (very poor) to +3 (very good), reflecting a modest year-over-year improvement of 0.37 points. Institutional investors and property managers rated market conditions most favorably, with respective scores of 0.40 and 0.63. Although project developers remained the least optimistic, their sentiment rose by 0.8 points, suggesting a positive shift following two challenging years. Peter Lenz, partner at Ypsilon Steuerberatungsgesellschaft, observed, “The industry appears to be gradually moving back to a more neutral mood, a sentiment echoed at recent events like Expo Real.”
Residential and Logistics Top Investment Preferences; Office Sector Faces Challenges
The survey forecasts a continued appetite for residential properties, with 79% of respondents predicting strong investor interest in rental apartments and 42% favoring logistics real estate. Demand for office and retail real estate, on the other hand, is expected to soften, with 57% of respondents anticipating lower office demand and 54% forecasting declining investor interest in office properties. Carsten Demmler, Managing Director at HIH Invest, commented on residential demand, stating, “Population growth and the trend toward smaller households continue to drive demand, especially given the limited supply of new housing.”
Rent Expectations: Strength in Residential, Weaker Prospects for Office and Retail
In the coming year, residential rent increases appear likely, with 94% of respondents forecasting rises, while 62% expect rents to climb by around 5%. Logistics rents are also poised to increase, with 43% of survey participants expecting a 5% rise, and a smaller group anticipating even stronger growth. Conversely, the outlook for office rents remains muted. Approximately 76% of respondents expect office rents to either decline or stagnate, with 45% predicting a decrease and only 24% expecting growth. According to Felix Meyen, HIH Invest’s Managing Director, “While demand for prime office space in central business districts remains steady, outdated stock in secondary locations will likely struggle, increasing rent disparities.”
Price Forecasts: Rising Values for Residential and Logistics, Declines for Office and Retail
Notably, residential price expectations have shifted upward. In 2023, most respondents anticipated falling prices for multi-family buildings, but this year, 63% expect values to rise. The logistics segment follows a similar trend, with 52% forecasting price increases. Meanwhile, the commercial outlook remains less optimistic: 59% anticipate falling prices for office properties, and 49% expect retail prices to drop.
A-Cities Remain Preferred Office Investment Markets; B-Cities Dominate Residential and Logistics
A-cities hold the highest appeal for office investments, with 73% of respondents pinpointing these areas as top opportunities, while residential and logistics investments are expected to perform best in B-cities. Notably, 47% of respondents favor B-cities for residential investments, reflecting a strategic shift as investors seek high-growth potential beyond the primary cities.
The sentiment survey, conducted from late August to late September 2024, underscores a resilient residential and logistics market in the face of broader challenges, with institutional investors positioning themselves for long-term growth across diversified sectors.
