First Standard for Real Estate Due Diligence Established
21. October 2015
The thriving real estate market has a new tool to improve efficiency. A team of experts has reflected upon the challenges of transactions and set the need of a standard index structure as top priority. The result is pioneering: the first official index for real estate data rooms has seen the light in Germany
This year, global real estate markets keep gaining momentum. If the forecast for Q1 was already optimistic, the results of Q2 can only confirm this positive trend reaching USD 177 billion worldwide. According to the last JLL report, the market was not doing so well since 2006 and currently attests of transactional volumes of +9% with respect to Q2 2014! With a volume of € 24 billion, Germany is the third strongest real estate market. In this effervescence of cross-border transactions, there is the risk that actors coming from different national backgrounds get confused – and ineffective.
Standardizing is the key to more efficiency
Due diligence is by now the consensual process for asset transactions as it ensures simple and precise reviewing of the many documents needed. However, collecting and finding the documents can result in a waste of time – and in a headache for some. Luckily, experts in the field have sat together and thought of a solution: a standard data room index considering all the requirements. Jan Hoffmeister, managing director of Drooms and head of the team states: “The index is an important step for the professionalization of transactions, it will improve the efficiency of the process and save a lot of precious time to sellers”. The project has been supported by the German Society of Property Researchers* (gif - Gesellschaft für Immobilienwirtschaftliche Forschung e.V.).
How the index speeds up processes
The use of the index is not compulsory, yet the GIF recommends it as standard for all due diligence transactions. This will in fact benefit all sides of cross-border deals, mostly those not familiar with German requirements. The index covers the different verticals of a due diligence comprehensively: technical, legal and tax aspects. In case data room owners need to modify sections, the index offers specific tips and a great flexibility to update documents. By combining a clear structure with enough plasticity, due diligence becomes a slim process where participants can quickly find and review documents. This effort of optimization is a key step for real estate actors in that it accompanies a transnational market growing at a very fast pace.