The mood among professionals who provide financing for Germany's commercial property sector weakened substantially in the second quarter, according to a BF.direkt survey published on Monday. The survey's barometer fell to -25.97 from -9.74 in the first quarter, signalling a pronounced reluctance to extend financing.
Survey respondents and advisors linked the deterioration primarily to developments in the Middle East. "These results can be explained primarily by the war in Iran and its consequences. The energy price shock is driving up inflation, which in turn is fuelling fears of rising interest rates," said Steffen Sebastian, an academic and advisor for the survey.
Sebastian added context on the state of the sector: "This is hitting an industry that has already been in a fragile situation since the sharp rise in interest rates in 2022." The comment underscores that the current squeeze on financing sentiment is unfolding against a backdrop of heightened sensitivity to interest-rate moves after 2022.
BF.direkt's findings also show concrete shifts in market participants' experience: more than 46% of those surveyed reported that financing conditions had worsened. The survey was conducted between June 8 and June 16.
The report notes how prices have behaved in recent years: commercial real estate values fell in the wake of the Ukraine war in 2022, and while they have since begun to recover, that rebound has been halting. The combination of a fragile price environment and renewed inflationary pressure appears to have reduced lenders' readiness to commit new capital to the sector.
For stakeholders tracking lending flows and property valuations, the BF.direkt barometer offers a direct gauge of financing appetite. The significant quarter-on-quarter drop to -25.97 points to constrained credit availability and a conservative stance among providers of commercial real estate finance as they reassess risk in light of the recent geopolitical and macroeconomic developments.
Survey details
- Survey period: June 8-16
- Barometer: -25.97 in Q2, down from -9.74 in Q1
- Share reporting worse financing conditions: more than 46%