COVID-19 leads to re-think about attractions of sale-and-leaseback

New real estate leasing business in Germany grew to €1.5 billion euros in 2019, with a number of observers tipping further strong growth, prompted by COVID-19.

Figures released by the Federal Association of German Leasing Companies e.V. (BDL) confirm the upward trend in real estate leasing over recent years. With about €1.2bn flowing into real estate via leasing transactions in 2017, this rose to €1.4bn in 2018 and €1.5bn in 2019, a rise of 7.1% year on year. And that’s just new business. The sum of all current real estate leasing contracts at current book values is put at about €12bn.

The Munich-based CoRE Solutions GmbH said it expects further strong growth due to the consequences of COVID-19. The company’s managing director Klaus Busch said: "Although real estate leasing is a niche market in relation to general real estate financing via banks, it is still a very important segment for us. Furthermore, developments over the past few years shows that the demand is continuously increasing. 

“We expect a further significant increase in 2020, as the economic consequences of the Corona pandemic mean that many companies urgently need liquidity. This is where real estate leasing comes in. Companies release the capital from their real estate, but still retain long-term access to the properties. We are currently receiving an increasing number of inquiries from companies that have liquidity needs and where Corona has led to a rethink. We are currently making concrete preparations for several leasing transactions".

His colleague Marcus Bender added, "In recent years while there has been a high level of interest from investors and lenders in sale-and-lease-back transactions, the limiting factor was always the lack of suitable assets. This will change with the altered economic situation of many companies".