By Sara Seddon Kilbinger, Senior Reporter, REFIRE
COVID and rising costs putting pressure on real estate sector
A shortage of skilled workers in the real estate industry in Germany is having a knock-on effect across the board, according to the latest Industry Barometer 2022 published by the Association of Property Managers Germany this month.
The majority of participating property management companies surveyed anticipate a renovation backlog due to a lack of tradesmen and rising material prices, with more than a quarter of them blaming COVID, according to the survey.
Legal regulations intended to ensure a wave of renovation in the building sector or to help reduce energy consumption do not seem to be having any effect. A lack of tradesmen, rising material prices and cancelled owners' meetings are cited by management companies as the main reasons for a lack of renovations. About one-third expect the renovation backlog to increase because owners' meetings repeatedly failed to take place on a regular basis.
‘The industry barometer identifies key metrics and highlights future trends,’ said Martin Kaßler, managing director of the Association of Property Managers Germany. ‘The survey is adapted to economic and legal changes every year. This makes valid comparisons possible, the findings of which property management companies can successfully use for the future.’
Project cancellations remain high but prices are rising
Construction has been particularly badly hit, with the industry struggling to recruit new talent, according to a survey carried out last month by Munich’s ifo Institute, with 40% of respondents citing a shortage of skilled workers. Project cancellations are also becoming increasingly common, with 13.4% of respondents affected by them in May.
‘The scale is similar to what happened during the Coronavirus shock in spring 2020,’ said ifo researcher Felix Leiss. ‘This time, we’re seeing particularly frequent cancellations in residential construction. On the other hand, order books remain full to bursting. But skyrocketing construction costs, higher interest rates, and diminished subsidy options are putting more and more projects in jeopardy. We have seen a wave of cancellations since April. All this is pushing the German government’s ambitious targets for new construction into the distant future.’
However, it’s not all bad news. The shortage of building materials – which had worsened dramatically with the Russian invasion of Ukraine – is slowly starting to ease. In July, 45.6% of companies in residential construction reported delivery problems, a slight improvement on 47.6% in June, according to ifo: ‘As a result of shortages and high energy costs, many building materials have become significantly more expensive, meaning construction companies have had to keep raising their prices, too,’ Leiss said. Subsequently, a large number of respondents still expect further price adjustments in the coming months. Price expectations in July stood at 54 points, down from 61.5 points the previous month. ‘At the same time, higher interest rates and, in residential construction, limited subsidy options are weighing on demand for construction services. Sentiment in construction is tipping,’ Leiss added.
More training places yet apprenticeships remain unfilled
Companies are trying to counter the shortage of skilled workers with more training places, but also by streamlining their portfolios, according to the Association of Property Managers Germany. The shortage of skilled workers is being countered, where possible, by increasing the number of apprentices, and investments are also being made in employee training, typically to the tune of around €1,363 per person per year.
Another hurdle is the new Heating Costs Ordinance, which came into force last December and made it mandatory to read appliances remotely and record consumption during the year, and which seems to be missing its target of reducing energy consumption. Only 5.6% of property managers currently consider consumption information to be an important tool for owners and tenants.
Neither is the problem limited to real estate circles. Construction actually fared better than the Germany-wide average: across all sectors, almost 50% of companies complained of a shortage of skilled workers: ‘More and more companies are having to cut back on business because they simply can't find enough staff,’ said Stefan Sauer, a labour market expert at the Ifo Institute.
In the medium and long term, he expects this problem to become even more serious, due to the fact that the construction industry has failed to recruit sufficient junior staff for years. At present, 40,000 young people are undergoing training in the construction industry, according to the Central Association of the German Construction Industry (ZDB), rising for the fifth consecutive year, yet many apprenticeship positions are not filled.
