Transparency in the German real estate market
| Published date | 01 February 2005 |
| DOI | https://doi.org/10.1108/14635780510575111 |
| Pages | 90-108 |
| Date | 01 February 2005 |
| Author | Karl‐Werner Schulte,Nico Rottke,Christoph Pitschke |
| Subject Matter | Property management & built environment |
PRACTICE BRIEFING
Transparency in the German real
estate market
Karl-Werner Schulte
European Business School, Oestrich-Winkel, Germany
Nico Rottke
DIC Asset AG, Frankfurt, Germany, and
Christoph Pitschke
DB Real Estate, Eschborn, Germany
Abstract
Purpose – German real estate markets used to show little transparency in the past. This has changed
over the last 15 years. The purpose of this study therefore is to examine the current state of
transparency.
Design/methodology/approach – The study investigates and discusses the concept of
transparency in general, availability of private and public market data, major real estate
investment products, performance measurement, changes in the regulatory environment and the
emergence of organizations and publications. The findings of this study are obtained in a comparative
manner: The transparency status of the 1990s in the different areas researched is compared to the
current German and other international standards. The authors describe the relatively opaque German
real estate market as it was at the beginning of the 1990s and show how it has improved to date.
Findings – The results show that transparency in the German real estate market has noticeably
improved in all researched areas. But still, compared with the USA or the UK, the German real estate
industry and real estate market still lack transparency and are characterized by information
asymmetries and opaqueness.
Originality/value – The results indicate that the German real estate market and industry become
more mature and bit by bit converge with their US and UK archetype.
Keywords Real estate, Informationexchange, Germany
Paper type Research paper
1 Concept of transparency
A sound overview of the market and hence market transparency is a general
prerequisite for successful investment in real estate. Only transparent markets can
create confidence and be attractive to professional investors.
In the past decade, the German real estate market has undergone a dramatic
transformation towards increased transparency. At the beginning of the 1990s there
were hardly any high quality brokers’ reports, practically no real estate databases and
no potential to measure performance. Academic institutions, research organizations,
brokers, consultants, banks and the emergence of the internet have all contributed to
an improvement of market transparency in the course of the last few years.
The term “transparency”, although often used, is not an expression that is clearly
defined in real estate literature. In the economic sciences, transparency refers to
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1463-578X.htm
The authors thank Alec H. Evans FRICS for his translation from the original German.
JPIF
23,1
90
Journal of Property Investment &
Finance
Vol. 23 No. 1, 2005
pp. 90-108
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780510575111
information equivalency. The opposite of transparency, opacity, can therefore be seen
as “information asymmetry of market participants”. Applied to the German real estate
market, the conclusion from the above statement is that transparent markets provide
as much information as possible for all market participants and therefore minimize the
information advantages of other market participants. For the purpose of this study, a
working definition has been established according to which criteria that appear
appropriate to distinguish transparent from opaque real estate markets have been
selected: “Real estate markets can be described as transparent when it becomes clear
how the market mechanisms and the variables behind these mechanisms work, i.e.
when there is as much information as possible available at any point in time.”
In terms of the real estate market this leads to the necessity of obtaining access to
reliable data related to the following sub markets:
.the rental market, e.g. average and top rents, lease rents, demand and supply of
space;
.the investment market, e.g. property rents and yields; purchase and selling
prices;
.the property and construction market, e.g. building costs; and
.the capital markets, e.g. lending conditions.
Having regard to these variables, the objective of this paper is to determine the current
degree of market transparency in Germany.
2 Availability of private and public market data
2.1 Real estate market reports and newsletters
The availability of real estate market reports has increased significantly over the last
ten years. In comparison with the 1990s, when only very few market reports were
available, almost every major real estate broker or bank now publishes a market report
in one form or another. It is, however, not only the quantity, but also the quality of
market coverage that has been improved. Ten years ago, only the real estate office
market was subject of market reports and just in the major cities (Frankfurt, Hamburg,
Du
¨sseldorf, Munich and Berlin). Today many cities are covered, with a variety of
variables (vacancy rates, absorption rates, etc.) being available. The compa nies
illustrated in Table I provide some of the most important market reports for the
German real estate market.
However, no comprehensive reports on the state of the German real estate market
were published until 2002. In that year the founding of the so-called “Rat der Weisen
der Immobilienwirtschaft” (Council of the “wise men” of the real estate economy)
fortunately remedied this. As a result of an initiative from the real estate newspape r
Immobilien Zeitung, three leading independent research institutes, empirica, Bulwien
and GfK, have now joined forces to provide autumn and spring forecasts, which should
result in more transparency on the real estate markets. The working group of the three
research institutes presented its first conclusions, Fru
¨hjahrsgutachten
Immobilienwirtschaft 2003 (Report on the Real Estate Economy, Spring 2003) at the
Cimmit real estate congress in January 2003. The report contains a review of the
current state of affairs and an assessment of the general economic situation, as well as
forecasts for future developments in residential, office and retail property in Germany
(rents, values, vacancy rates, completions etc.). There are also in-depth appraisals of
German real
estate market
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