Since Europe has moved to the centre of the global spread of the coronavirus, there have been massive price distortions in all liquid asset classes. At the same time, the volatility of the financial markets has risen dramatically. In contrast, real estate markets are less transparent, as naturally there are no permanent price determinations.

The charts on page 3 show the development of selected liquid asset classes.

From our point of view, it is particularly noteworthy that the price decline of the last 2 weeks has hit the typical safe havens, such as German government bonds and gold, as well as the per se risky equity capital markets. At the same time, stock market volatility, as exemplified by the EUROSTOXX 50 Volatility Index, is as high as at the peak of the financial market crisis in 2008-2009.

The effects on the real estate investment, letting and financing markets are currently as difficult to predict as the duration of the crisis. Still, we are already observing a development.

Due to the uncertainty in the markets, the environment for real estate investments, rentals and financing is becoming much more fragmented and difficult to assess.

Let us follow current market developments together and look for solutions and opportunities.

-Liquid asset classes will continue to influence the pricing of real estate in the future. In the current market environment, we believe that even super core properties will be affected, at least as long as "risk free" German government bonds continue to lose value while in parallel central banks continue their expansionary policies. Accordingly, investors will also revalue the Core+, Value add and Opportunistic segments. Recent years have shown, however, that the decisions made by politicians and central banks in times of crises can be positive for the real estate markets in the long term.

-The letting markets are currently severely affected by operational hurdles alone. Prospective tenants and owners have cancelled countless site visits. The coming months will show whether and to what extent tenants will adjust their space requirements. Be it due to the adverse development of their operating businesses during the crisis or the restructuring of operational processes. The proportion of home offices, the demand for logistics space, the requirements for IT infrastructure and the attractiveness of any type of shared office everything seems to be subject to major changes in the future. It is obvious that in the upcoming years, the correct (re)positioning of properties will play an even more important role.

- As in recent crises, the condition and receptivity of the real estate credit markets will be a key drivers of the real estate investment markets. Some (commercial) banks will reduce their volume of new business due to (imminent) higher risk provisioning expenses and economic uncertainty. Other banks remain open to fund " new business in stable real estate assets or will write new business again sooner than others. An overall picture that is at least as diffuse can be expected from alternative lenders. The importance of examining all options in each individual financing transaction and identifying the best possible financing partner will increase significantly. In the short term, the focus will be on securing liquidity for properties that have to cope with rent losses or project developments. Here too, the alternatives banking market, non banking market, government aid programmes are fragmented and difficult to assess a priori.

We want to continue working with you on all aspects of real estate, real estate investments and financing.

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