Commercial Real Estate Financing Becomes Easier Again

The latest report from the German Commercial Real Estate Financing Index (Difi) indicates a positive trend in the financing of commercial properties. In the first quarter of this year, the index saw a significant increase. The Difi, published quarterly by JLL and the Hamburg Institute of International Economics, examines the financing conditions for office, retail, logistics, and residential properties, as well as the situation in refinancing markets and provides outlooks for the next six months.

The improved forecasts for the coming months are particularly related to the expected interest rate cuts by central banks, notably the European Central Bank (ECB). Herbert Dzial, CEO of HD Group and experienced real estate expert with over 30 years of experience in the German market, sees his expectations confirmed: “The announced interest rate cuts are an important stimulus for developers. Especially in the residential sector, there is a significant demand that we approach with confidence. The expected interest rate developments will further boost this market. But also the commercial real estate market, which is already on a solid consolidation path, will benefit. The demand for modern office spaces meeting ESG standards will continue to rise, supported by the reinforced trend of employees returning to the office.”

Since the trough at the end of 2022, the Difi has shown a steady increase again, particularly compared to the last quarter of 2023 with an increase of 25.5 points. The residential segment saw the strongest increase by 40.3 points to 12.1 points and is the only category in positive territory. Hotels and logistics also saw increases of 27.4 and 18.7 points, respectively, although they still stand at minus 5.2 and minus 17.2 points. There was also a significant increase in the retail sector by 28.4 points, leading to a new level of minus 17.2 points. The office sector recorded an increase of 12.6 points and remains significantly negative at minus 48.3.