Germany's Real Estate Industry Awakens from Sleeping Beauty Slumber. After a challenging year marked by cautious new business, rising interest rates, and tougher financing conditions, there are now initial signs of recovery. An increasing number of companies are reporting growing new business, and experts no longer view the financing conditions as restrictive as before.

A key indicator of sentiment in the real estate financing market are the statements from major corporations expected this week. Particular attention is being paid to LEG Immobilien, Germany's second-largest real estate company, and Vonovia, the market leader with over 548,000 apartments in its portfolio. The questions remain the same: How resilient has the business model proven to be during times of crisis? And are the implemented restructuring measures effective?

The kickoff was made on Monday by LEG Immobilien and the figures were surprising: Although the industry giant reported a high loss of around 1.5 billion euros, the operational business went according to plan. Particularly pleasing was the growth rate of the essential profit metric AFFO (Adjusted Funds from Operations), which represents the freely available cash flow and increased by over 66 percent to 181.2 million euros. As a result, a dividend of 2.45 euros per share will be distributed, after none was given last year. Investors responded positively, and the LEG share was one of the biggest winners in the MDax on Monday.

LEG CEO Lars von Lackum Expressed Optimism and Foresees Further Earnings Growth and Increased Transaction Activity in Real Estate Markets in The Future. In Contrast to Some Competitors, LEG Benefits from a Focus on Affordable Housing for People with Low and Middle Incomes, Which is Advantageous in the Current Situation. On Average, the Cold Rent at LEG Last Year was 6.58 Euros Per Square Meter, Corresponding to an Increase of Four Percent. For This Year, von Lackum Even Expects an Increase of 3.2 to 3.4 Percent.

The Competition, Led by Vonovia, to Present Their Figures on Friday, Recorded an Average Basic Rent of 7.58 Euros per Square Meter Last Year. Analysts Expect Vonovia to Confirm this Figure. Reports Also Cover the Housing Shortage, Which is Said to be Similar at Vonovia as it is at LEG. TAG Immobilien, Which Will Announce Their Figures on Tuesday, Confirmed the Trend of a Decrease in Vacancy Rates. Experts Consider the Situation to be Better and Set the Target Price for TAG Shares Higher than the Current Price.

A key aspect for the profitability of real estate companies is new leases. Here, prices in many areas are already reaching double-digit euro amounts. Von Lackum therefore warns of a stagnation in the housing market, as many people willing to move prefer to stay in their current apartment due to the price differences between existing rents and new leases.

In addition to rental income, real estate conglomerates have also made provisions in financing in recent years. LEG adjusted its business strategy in November 2022 and already sold around 2000 real estate units last year. Further sales are planned for this year to generate additional equity and to reduce the level of debt. This has risen to 48.4 percent last year, among other things due to rising interest rates, and is therefore above the target value of 45 percent. For refinancing, LEG and Vonovia have decided on new approaches, such as issuing bonds in British pounds.

Fabio Carrozza, Managing Director of BF Real Estate Finance, assesses the situation as slightly improved, but still starting from a bad level. However, he believes that both financiers and borrowers can better adapt to the difficult market conditions and thus manage the crisis well. Accordingly, the industry is not yet out of the woods, but on the path to recovery.