The corona crisis is putting a damper on many project developers’ plans, with the volume of completions in the seven A-cities likely to shrink by around a fifth in the coming years, the Berlin-based research and analysis group Bulwiengesa believes. Particularly hard hit will be residential construction.
Bulwiengesa expects that numerous construction projects in the seven A-cities - Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart - will not be completed as planned due to the corona pandemic. Of the 20.5 million sqm of building space originally planned for up to 2024, 4.2 million sqm will fail to see the light of day, say the researchers.
Andreas Schulten, CEO of Bulwiengesa, believes that particularly the projects calculated with a very fine pencil tip are likely to fall victim to the crisis, while further projects with a total space volume of 2.5 million to 3.5 million sqm are expected to be completed only "very much delayed".
Schulten stresses that these are only assumptions, not statements of fact. However, the 4.2 million sqm that bulwiengesa has quantified as the "corona effect" is "fairly conservatively modelled", he believes. These relate exclusively to parts of speculative project planning, meaning there are no pre-leases. However, Schulten points out that in a recession, even supposedly ‘safe’ projects may prove shaky, while some project developers themselves are unlikely to escape the fallout.
Hardest hit will be the residential sector, the researchers believe. Of the planned 9.7 million sqm, about 2.4 million sqm will not be completed by 2024, and a further 1.5 million sqm will be realised only with a considerable delay. For office properties, the cutback is 1.4 million sqm compared to the original pipeline of 7.9 million sqm. Added to this are projects with 1 million sqm, which are experiencing significant delays.
The figures are based on a survey of 23 project developers conducted at the end of March, when 76% of respondents said that they expected delays in construction projects as a result of the corona crisis. A further 48% also assumed that projects would be postponed despite existing building permits, and 68% expected delayed planning with building permits still outstanding. On the other hand, 84% replied that there would be no abrupt project cancellations of existing works in progress.
