Over the last 18 months, the economic crisis has lead to noticeable changes in the real estate industry. Valuators and analysts of real estate projects are affected by these changes, too. “It has been recognized that now and in the future, a valuation and the quality of the valuation are going to be one of the most important marketing tools for investors,” explains Alfons Metzger from MRG Metzger Real Estate Group. Martin Matthias Roth, Managing Director of Immobilien Rating GmbH, compares with an example: “If I need to have heart surgery, I’m going to look for the best doctor, not the cheapest.” The valuation specialist is aware that the market had already noticeably changed for the better throughout the last 15 years, but that within only a short time, another push towards professionalism occurred due to the crisis. According to Metzger, what is important to the experts is that “valuations will achieve a high general level of quality, and not be a cookie-cutter mathematical formula.” Just like Roth, the expert is criticizing that investors sometimes still don’t pay enough attention to the soundness of a company and in turn its assessments, and that clients buy based on the price of valuations and not their quality. Particularly since, according to Roth, the cost of a valuation is “one-tenth of a percent or less of the property value”. However, in general, he seems content with the developments: “The crisis has contributed to quality becoming more important again, and to generally raising the standards on a wide level.” Although the long-established companies already are at that level, they too are interested in the education and training of their employees, as IRG director Roth says: “We strive to have as many employees that meet internationally certified appraiser standards as possible.”

Risk Awareness has increased

Due to the crisis, investors have lost their belief in the perpetual appreciation of any property. Anton Bondi, Managing Director of Bondi Immobilien-Consulting GmbH: “Risk awareness with regard to general location criteria has significantly increased among investors.” While before the crisis, what was available on the market was purchased (simply out of pressure to invest), they are now “proceeding much more selectively”, as Michael Reinberg, Managing Director of Reinberg & Partner, observes: “Before, investors used to look at the market and when there was a potential project, they would join the ranks of prospective buyers. Today, they specify in much more detail what they are looking for.” Sometimes, investors even integrate valuators and analysts prior to their search, so they can better plan their projects. “The objective of the property they are looking to invest in is described in great detail,” says Reinberg. At the moment, investors are slowly getting their feet wet again and starting to search for suitable projects. The basic requirements however have remained the same as before: credit-worthy tenants with long-term rental agreements. These factors are considered particularly important. Reinberg: “This way, investors try to be on the safe side and prevent future demise.”

Demand for Professional Competence rising again

After the lessons taught by the crisis, project developers are also increasingly resorting to the offerings of consultants and analysts, as Metzger observes: “Lately, much greater attention has been paid to whether the product that is to be created is also future-oriented and suitable for the market.” This applies to project developers as well as architects and builders. Metzger: “Project ideas are being analyzed and the potential of a property is being assessed. If a company is signing a major contract today, the builder and the architect also want to know if the project is going to be successful.” None of the contractors want to be left with unpaid bills at the end. Bondi is pleased with the developments: “The sharpened requirements from valuators and builders, as well as potential users, mean that speculative developments by people looking to make a quick buck are practically disappearing, which leads to a healthy market adjustment that benefits serious developers who are calculating long-term.”

Screening Existing Portfolios

Quality is not only a focus for future projects; existing portfolios, too, are analyzed and examined closely. Reinberg: “Owners are reviewing their portfolios to know which values they have. This way, they can restructure them through targeted sales and purchases.” There is also the fact that sustainable properties, of course, play an increasingly important role in portfolios and investors are separating themselves from properties that do not meet these requirements. However, all the valuators agree: Independence will be an essential factor for appraisers and consultants in the next few years, as well as a large basis of well-trained employees and an eye for the essential. [ WS ]