German bank PBB's office index dips further into "crisis" territory

Credit: REUTERS/Michaela Rehle

FRANKFURT, Feb 22 (Reuters) - Germany's office market is in its bleakest state since early 2009 during the global financial crisis, an index by the property lender Deutsche Pfandbriefbank PBBG.DE (PBB) showed on Thursday.

The latest data reveals a downturn that takes the commercial real estate market in Europe's largest economy deeper into "crisis" territory. Demand was especially weak in Berlin, Munich and Cologne with falls of more than 30%, the bank said.

The bank's quarterly index tracking the German office market declined to minus 1.96 in the fourth quarter, down from the minus 1.61 in the third quarter and the lowest level since the first quarter of 2009.

"For Germany, 2023 was defined by a contracting economy, a consequent slowdown in demand for office space and plummeting investment market revenues," the bank said.

Vacant office space is significantly higher than a year ago, but it expects a "stabilisation" in office markets in 2024, PBB said.

The index focuses on Germany, but it was PBB's aggressive expansion into the U.S. commercial real estate market that recently startled investors.

In the United States, higher interest rates, refinancing difficulties and lower office occupancy have hit the commercial real estate sector hard, fanning fears of a global downturn.

The ratings agency S&P cited "challenges from commercial real estate" when it recently downgraded PBB and gave it a negative outlook.

PBB has 5 billion euros - or 15% of its loans - tied up in the U.S. commercial market.

TIMELINE-German property lender PBB and the crisis-hit US market

EXPLAINER-European banks and their $1.5 trillion commercial property headache

Under pressure https://reut.rs/48vLvu2

(Reporting by Tom Sims Editing by Ros Russell)

((Tom.Sims@thomsonreuters.com; +49 30 220 133 645;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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