Commercial Real Estate in Germany

Hyderabad, 02nd March 2023: The Institute of Management Technology (IMT) Hyderabad, on March 02, 2023, organized its fifth session of the Global Immersion Program (GIP). The guest speaker for the session was Dr. Daniel Hofmann, Financial Director, Krieger Gruppe, Germany. The speaker has experience handling over five shopping malls in Germany and many more multi-tenant projects. The session focussed on commercial real estate in Germany.

Dr. Hofmann defined commercial real estate as a business unit that generates regular cashflows. He also mentioned some key players in the commercial real estate sector, such as investors, property managers, developers, brokers, and bankers. The impact of global events such as Covid – 19 and Russia Ukraine conflict was also discussed. The speaker shed light on how the Russia-Ukraine conflict has significantly impacted the German real estate industry since Germany primarily depended on Russia for its energy requirements. Since the start of the conflict, it has seen a considerable spike in energy prices.

During the conversation on the business aspect of the real estate industry, Dr. Hofmann highlighted the essential factors for a booming shopping mall, including location, accessibility, and a steady flow of foot traffic. He emphasized the significance of having a diverse range of shops and vacancy rate in a mall. Additionally, he discussed the importance of customer satisfaction when visiting a mall and the strategic placement of stores. He also explained how malls could assist businesses in promoting their products through a range of marketing techniques.

Speaking about the finances of running a mall, Dr. Hofmann gave insights on various cash inflows and outflows, with some of the significant cash inflows including cold rents, maintenance and utility instalments, management charges, and marketing contributions. Significant outflows included utilities, maintenance, marketing, and staff personnel. Various contract terms were also discussed, most of them with annual revenue calculations. Typical contract terms such as protection against competition, rent-free period, and indexation were also mentioned.

While concluding the session, Dr. Hofmann shared some significant learnings. He suggested that the students understand and scrutinize the matter at every possible level, keeping options open and building opportunities on related topics. Subsequently, a gesture of appreciation was extended for the valuable and informative session.

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