Project developers usually make advance payments, which increases their risks.
(Photo: dpa)
Frankfurt The construction of real estate is extremely complex – both private builders and managers of large corporations know this. The list of possible problems is long and starts with the application to the competent authority for a building permit. The industry is openly complaining that building applications take a long time to process in the offices.
And even if you hold them in your hands, nothing is certain: Archaeological finds while excavating the foundations, the discovery of rare reptiles or insects or buried World War II bombs can thwart the best planning.
The business of project developers is therefore considered risky in the real estate industry – after all, the companies must first go ahead with the purchase of a property and the subsequent construction planning and implementation of a building or agree on the financing with a bank until – when everything is done works – one day the property can be sold.
At all costs, project developers try to avoid the excavators on the construction site. Delays, like those currently occurring in some projects at the Adler subsidiary Consus, are a nightmare for every developer.
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Lack of material or craftsmen, problems with supply chains – there are many factors that could slow down a construction project. But according to a survey on behalf of the Central Association of the German Real Estate Industry ZIA and the Institut der Deutschen Wirtschaft IW, the mood among companies is currently quite good. Project developers still have full order books, mainly due to the housing shortage in the metropolitan areas.
There is a lot of hard work going on on numerous construction sites in Germany – as some industry giants confirm. “There is no downtime and no massive delays on our construction sites,” explains a spokesman for the Zech Group, one of the three largest project developers in Germany’s metropolises, when asked.
A spokesman for the East German real estate company Bonava confirms this for his company: “There is currently no ongoing construction project that has come to a complete standstill.” Bonava is one of the leading project developers in residential construction in Northern Europe and Germany and builds for owner-occupiers, private investors as well for institutional investors mainly apartments in Berlin and in the regions of Hamburg, Rhine-Main, Rhine-Ruhr, Cologne / Bonn, Rhine-Neckar / Stuttgart and Saxony as well as on the Baltic coast.
At most delays
You register “delays” in ongoing projects, for example due to unexpectedly protracted development planning procedures. During the corona pandemic, the process times were noticeably longer, and there are still very long processing times for building applications in some offices. But both bottlenecks have already improved in the past few months – and there are no major effects from delivery bottlenecks “at Bonava at the moment”.
Instone Real Estate, also one of Germany’s leading residential developers with currently 52 ongoing projects, confirms this impression on request. Although there were delays in the approval processes and ultimately reduced sales expectations for 2021 in the wake of Corona, “for Instone’s projects, which are in the construction phase, however, we do not see any notable delays in the individual projects,” emphasized a company spokesman.
Neither the corona pandemic nor the supply bottlenecks of individual materials currently observed on the market have slowed down work on the construction sites. With regard to delivery bottlenecks, Instone benefited from its market position and its “good reputation” with its suppliers. In addition, construction work is deliberately purchased at an early stage. “There are no downtimes at all in Instone projects.”
More: Adler Group comes under pressure due to stagnant major construction sites.