Commercial Property Finance
The vdp member institutions remain the most important provider group for commercial real estate finance in Germany.
Development of commercial real estate finance in Germany as a whole
As the development of the past almost 30 years has shown, the commercial real estate market reacts very sensitively to changes in the economic environment and is therefore subject to greater fluctuations than those observed for the residential market. Thus, both the construction and transaction volume as well as lending decreased significantly in the years following the dotcom and financial market crisis. For example, commercial loan commitments plummeted by 34% from 2007 to 2009. From 2010 onwards, commercial construction and transaction volume showed a steady upward trend, reaching its highest level to date of around 152 bn. euros in 2019. As a result of the economic crisis triggered by the outbreak of the COVID-19 pandemic, the commercial construction and transaction volume fell by 13% to around 132 bn. euros in 2020. Lower transaction figures (-32%) were solely responsible for the short-term decline, while the construction volume moved sideways.
The commercial financing volume peaked in 2016 at around 76 bn. euros. In the following years, loan disbursements continued to decline slightly and in 2020, due to the pandemic-related decline of almost 18%, reached their lowest level since 2012 of 57 bn. euros. The year 2020 started with a slight increase of almost 7% compared to the same quarter of the previous year, but the following quarters recorded declines of -20% to -30% compared to the previous year due to the economic recession.
Development of commercial construction and transaction volume as well as of loan disbursements
With a market share of 57% (2020), the vdp member institutions make up the most important provider group for commercial real estate finance in Germany.
Development of commercial real estate finance of the vdp member banks
In 2020, loans totalling just under 33 bn. euros were granted for the construction, modernisation or acquisition of commercial real estate in Germany. Compared to the previous year, this corresponds to a decline of 19%, so that the downward trend continued for the fourth consecutive year. However, the decline in the financing volume was significantly greater than in previous years. This reflects the fact that the commercial real estate market reacts very sensitively to economic downturns.
Because the COVID-19 pandemic triggered a recession in all countries, foreign business, which is important for Pfandbrief banks, likewise showed a decline, which at -23% was somewhat stronger than for domestic business. In total, loan commitments amounted to around 21 bn. euros for properties located abroad.
Development of commercial loan commitments of the vdp member institutions in bn. euros from 2010 to 2020
The USA was the most important foreign market for vdp member institutions in 2020. With just under 5.4 bn. euros, the USA accounted for a quarter of loan commitments. The UK came second with 3.6 bn euros, ahead of France (which ranked first in the previous year) with just under 3 bn. euros.
The structure of loan commitments by property type changed only slightly in 2020. For example, the share of financing for office properties fell slightly from 56.3% in 2019 to 55.6%. The share of hotel financing also declined from 8% (2019) to 5.4% as a result of the significantly lower financing volume. This contrasts with an increase in retail property financing from 21.3% (2019) to 24.2% (2020).