Corona crisis meets financing – an opinion from financiers

The coronavirus pandemic has changed us and the business world that we were used to overnight. Disbelief and shock quickly gave way to concerns about employee health, quickly followed by what must surely be the largest scale field trial of business continuity planning.

Maintaining the functionality of businesses for the short and medium-term was the objective. Now, countries and businesses are looking for a long-term way out of the coronavirus shutdown.

The framework conditions for financing were already clouded in early 2020, as demonstrated in the most recent publication of the German Real Estate Finance Index (DIFI) by JLL and ZEW, the market sentiment index for commercial real estate financing in Germany. This affected the specific current financing situation and, even more significantly, future financing expectations. This outlook should by now have exacerbated.

In order to assess the current situation on the financing market, JLL surveyed 27 mortgage banks, savings banks, credit unions, insurers and alternative financiers at the beginning of May on their handling of existing and new business.

Balancing different fundamental rights, protecting life versus the right to participate and freedom are an essential part of the pandemic timeline and thus also a part of the burden on the German economy. Lockdowns are now loosened successively or are lift ed completely. Regional conditions are taken into consideration in Germany, which is strongly characterized by the federal system. The relatively parallel loosening of individual restrictions however is at the expense of the quantifiability of individual protective measures. The pandemic is a global event, the specific effects of which are difficult to forecast in any case. In terms of the economy, we are expecting the worst recession since World War II.

The specific dimensions of this recession are currently still unclear, in particular regarding an economic recovery. The crisis furthermore showed the interconnectedness of the global economy to us export-dependent Germans.

The development of the investment and rental markets is decisive in the evaluation of the sustainability of real estate as loan collateral, which is the mainstay of real estate financing.