Real Estate Management Strategies in the Low-Interest Environment - a Roadmap for Economic Sustainability through the Market Cycle

In the low-interest rate environment, old and new investment groups are increasingly looking for safe, yet profitable and attractive, investment opportunities. These aspects favored real estate investments in recent years. At the same time, a possibly approaching end of the low interest rates and an unclear tendency between inflationary and deflationary development, call for awareness in terms of a wide range of individual questions, which in particular the market participants in the real estate industry have to address.In this paper, we introduce fundamental strategies, how real estate companies handle the financing of their portfolios with regard to low interest rates and uncertain future outlook. In this context, we put special emphasis on the issue that inherent risks in certain sub-markets are perceived higher today than during the last crisis. As first signs of a change in national interest policies are observed, we also discuss how national and international capital flows could change with changes in the interest rate environment as well as the state of the European industry’s preparation going forward. We analyze how performance estimates change economic real estate products and also the exposure of interest rate risk between several product categories. And finally, we propose observations and arguments in favor and against a new real estate bubble on selected real estate markets.