Hamburg Skyscraper Construction Halted, A Grim Signal for the German Property Sector – Reuters

By Tom Sims

FRANKFURT – Construction on one of Germany’s tallest buildings has come to an abrupt halt after the developer ceased payments to its construction firm, marking yet another troubling development in the country’s struggling property sector.

Signa, an Austrian real estate company known for owning New York’s Chrysler Building, had been making steady progress on the planned 64-story Elbtower skyscraper in Hamburg. However, according to an executive from the construction firm Lupp, Signa has fallen behind on payments.

"Our construction activities at Elbtower have been temporarily suspended due to outstanding payments from the developer," said Matthias Kaufmann, who manages Lupp’s finances, in an email.

Signa did not respond to requests for comment, but the city of Hamburg and a minority investor confirmed the construction pause. This interruption raises concerns about the future of the tower, which is estimated to be worth approximately 1.3 billion euros upon completion. It also serves as a warning from city officials regarding the challenges facing the property sector in Germany’s economy.

For many years, the real estate sector was a cornerstone of Germany’s economy, contributing about one-fifth of its output and providing one in ten jobs. The industry thrived on low interest rates, attracting significant investments as property was considered a stable and secure market.

However, rising interest rates and construction costs have reversed this trend, leading to financial difficulties for many developers, drying up bank financing, freezing deals, and causing property prices to decline.

Commerz Real, a subsidiary of Commerzbank, stated that discussions are ongoing with Signa and Lupp to "find a common solution" and expressed optimism that construction would resume.

Elbtower is located in the HafenCity area, which is also home to the famous Elbphilharmonie concert hall. The tower’s future tenants are expected to include a Nobu hotel and restaurant, the risk advisory firm Aon, and a local bank.

Just weeks ago, Timo Herzberg, CEO of Signa Real Estate, showcased the site as the structure approached a height of 100 meters (330 feet). He noted on social media that the building’s distinctive concrete pillars were beginning to outline its future iconic shape.

Hamburg’s senator for city development and housing, Karen Pein, cautioned that Signa must adhere to agreed milestones or face consequences. She emphasized that the city’s contract permits it to dismantle the partially completed work, sell it to another party for completion, or take on the construction itself.