Speaking to PropertyEU at Expo Real, Susanne Steinböck, group head of corporate communications and sustainability, explained that, in the face of challenging economic conditions, CA Immo is tightening up its investment criteria and prioritising locations with strong rental growth potential. In Germany, for example, rental yields are currently more attractive than in Austria, she said.

‘CA Immo observes a trend of market bifurcation. Prime office space in central locations, particularly in capital cities, is expected to remain stable and see rental growth. Conversely, weaker assets in B and C locations, especially those lacking strong ESG credentials, will struggle,’ she noted, adding that this trend has been accelerating since the pandemic.

Steinböck said she expects overall office demand to shrink. CA Immo is adapting to this trend by focusing on prime office space in the central business districts of major metropolitan cities. As part of this strategy, the company has already exited secondary cities and smaller Central and Eastern European (CEE) markets like Croatia and Romania and is considering pulling out of Hungary.

According to Steinböck, CA Immo’s financial position is stable and supported by reliable rental income. The firm is focusing on organic growth, prioritising development projects over external acquisitions for portfolio expansion. However, as existing portfolios age, investments are becoming necessary. The key question, she said, is whether these investments will deliver a good return.

For example, CA Immo is investing €132 mln in a prime office building near Berlin's main station, Anna Lindh Haus, which the company highlighted at its stand at Expo Real. This project, which meets high ESG standards, ‘demonstrates the company's continued confidence in the office market despite current challenges’, Steinböck said.

Additionally, CA Immo owns land and buildings in Europa City, a major urban development project near Berlin's main station. ‘This strategic location positions the company for future growth in Berlin’s most attractive office market,’ she noted.

Despite current challenges, Steinböck said that the real estate industry remains active, as evidenced by the large attendance and discussions at Expo Real.

She pointed out that the market is experiencing a ‘normalisation phase’ following a period of rapid growth. While this may present short-term challenges, the industry is confident in its long-term prospects. Consolidation is expected to occur among asset classes, leading to opportunities for the strongest players.

‘The office market is likely to undergo some disruption, but there is a growing desire among companies to bring employees back to the office. ESG considerations are becoming increasingly important for the industry. Companies must adapt their business models to meet these requirements and ensure long-term sustainability,’ she added.

While some companies have faced difficulties due to past risk-taking, those with a strong financial foundation are better positioned to weather the current challenges, concluded Steinböck.