As of: March 28, 2024, 6:32 p.m
By: Amy Walker
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New apartments are being built next to the city forest. © Rolf Vennenbernd/dpa
The construction crisis is leaving ever deeper traces. More and more companies are having difficulty staying afloat due to the slump in the construction industry. Now it's happening to a Wiesbaden real estate group.
Wiesbaden – The next major insolvency is causing an earthquake in the construction industry: The real estate group Deutsche Invest Immobilien AG (Dii) filed for bankruptcy on the Thursday before Easter. “Unfortunately, we have run out of staying power to overcome the current reluctance of investors and buyers,” said CEO Frank Wojtalewicz to
Handelsblatt
. In addition to the insolvency of the parent company, insolvency applications are also to be filed for some subsidiaries.
The real estate group primarily manages residential construction projects. According to its own information, the company manages a portfolio of properties worth four billion euros in 50 different locations. The company employs 280 people, most of whom work at the company headquarters in Wiesbaden. The responsible court should not decide on the insolvency application and appoint an administrator until after Easter.
Mega bankruptcy in the construction industry part of the construction crisis
The real estate group is one of several mega-bankruptcies in the construction and real estate industry, which has slipped into a deep crisis, especially in the past two years. The bankruptcy of the Austrian real estate group Signa caused a stir in November 2023, but smaller project developers also had to give up due to high interest rates, cautious investor activity and increased construction prices.
Adjusted for inflation, new orders in the construction industry in January were 7.4 percent lower than in December, as the Federal Statistical Office announced on Monday (March 25). Sales also fell significantly: in real terms they fell by 5.3 percent compared to January 2023. The situation is particularly dramatic in residential construction, where construction activity fell by 17.8 percent. Tim-Oliver Müller, managing director of the Main Association of the German Construction Industry (HDB), spoke of a “disastrous situation in housing construction”.
Unfortunately, an upswing in the construction industry is not expected any time soon. The mood in the construction industry brightened somewhat in March, as can be seen from the monthly company survey by the ifo Institute. Expectations increased after the historic low in the previous month. “However, the prospects remain bleak,” is the conclusion of the Munich economic researchers.
ECB doesn't want to cut interest rates again until summer
The federal government has been promising for months to support the construction industry with new measures. So far, however, very little of this has been implemented. Only a week ago, the Growth Opportunities Act with its tax relief for the construction industry was passed, after weeks of delay. Further plans, such as the temporary adjustment of the building code and the introduction of a “Young Buys Old” funding program, are reportedly stuck in departmental coordination.
Companies are now slowly running out of breath. The European Central Bank (ECB) does not want to lower the key interest rate again until summer at the earliest, and the situation is unlikely to improve for at least that long - unless political support measures come. The wave of bankruptcies in the construction industry is probably just now starting. At the end of 2023, the
Deutsche Handwerks-Zeitung
reported
that one in five insolvencies can currently be attributed to the construction industry.