Investing in Austria 18 ImmoFokus
German-speaking countries. And if a very good, long-term leased logistics property in a suitable location can now be obtained in Germany for five percent, then it is not the case that you can score in Austria with four or three percent. That will no longer work. Above all, it doesn‘t pay off if you have to take out financing at the current conditions. Do you think that with higher yields, we will see other international investors and not just mainly Germans in Austria? That is an exciting question. I expect that this year, due to the change in the yield situation, we will see more investors from the international sector than has been the case so far. The Austrians and Germans, who have dominated the market so far, have been very core-oriented, or more precisely, very conservative. If the market continues to change and issues such as ESG become more important, which is why old office properties are being brought up to date or at least to a newer standard, then classic value-add investors will come into play. These will still come from Austria and Germany, but also increasingly from the Anglo-Saxon region. We have seen fewer of them in this country in recent years. Because you mentioned ESG - are the investors you work with also interested in the S and the G? Absolutely, not just in the institutional sector but also with family offices and private investors. Among other things, investors are having a closer look at tenants. Suppose they come across companies that demonstrably violate environmental goals, child labor, or the like. In that case, they think twice about buying anyway, or at least a plan is worked out to compensate for this deficit on the ESG scale, i.e., to find new tenants. Actually, several industries can be seen unfavorably, not just arms manufacturers and the like. For example, companies that sell goods that have been produced in countries with demonstrably poor working conditions, child labor, etc.... This is true and is already being considered very closely. It can be assumed that such constellations will no longer be acceptable for investors and owners in the course of the further development of the EU taxonomy and that the players will react accordingly. One quickly realizes that one is in a very complex environment in which not everything has been settled yet. There is certainly still work to be done here. You said earlier that you are currently also handling or processing new projects that have only become available in <strong>2023</strong>. What asset classes are these? These are more or less widely diversified. There is a lot of office, and I think we will see a lot of office transactions this year - even more than in the last few years, when residential was the dominant asset class. But we will also see transactions in the hotel and retail sectors, where very little has happened in recent years. Of course, investors are also interested in residential, but there is considerable reluctance here at the moment due to the substantial change in interest rates. Overall, the transaction market has not come to a standstill. Transactions are just taking place at different price levels. There is still the demand and the capital, and those have to be brought together to get a deal done at the end of the day. Why is residential currently less in demand from global investors? Residential is complex. The large residential projects that worked very well in the past in the headwind of the market hardly exist anymore. Those who have bought land recently have paid very high prices for it. At the same time, construction costs are still high, even if the situation has eased somewhat, but not to the extent that some had hoped. In addition, financing costs have risen significantly. Many project developers were hopeful that the market environment of recent years would continue. That is, you buy, you file, and develop the project a month or two later with no financing costs. That business model no longer works. Money costs money again. And the exit, which was estimated at three percent, is also no longer happening or is becoming increasingly difficult. In other words, it‘s painful in all directions. That‘s why there are fewer projects on the market, „Many project developers were hopeful that the market environment of the last few years would continue. That hope has not materialized.“ Markus Mendel, EHL Investment Consulting and some of them are not even being built because people know that it‘s not profitable at the moment. Perhaps alternative financing had also been used ... Exactly Suppose you financed adventurously, for example, with short-term mezzanine capital or often simply with variable financing at initially favorable conditions. In that case, many market participants are now experiencing that the financing costs are exploding. Is mezzanine capital now osolete or is it getting a new boost? It will not happen that mezzanine capital costs will stay the same as before; they will rather gradually become more expensive, <strong>MIPIM</strong> | <strong>2023</strong> 19