Another worrying indication for the nation’s struggling real estate market, the developer of one of Germany’s tallest skyscrapers abruptly stopped paying its constructor in the middle of the project.

This year, construction on the 64-story Elbtower skyscraper in Hamburg has been steadily progressing, according to Signa, the Austrian real estate tycoon that also owns the Chrysler Building in New York.

However, an executive of the building company stated that Signa, which was started by René Benko, had fallen behind on its payments to its builder, Lupp.

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

Signa did not reply to messages seeking comment. The delay was verified by the German real estate division of Commerzbank, a minority investor, and the city of Hamburg.

The tower is expected to be completed at a cost of 1.3 billion euros ($1.38 billion), therefore the disruption raises concerns about its future. City officials have already issued warnings against it, and it’s another sign that problems are affecting the real estate market in the biggest economy in Europe.

For many years, the real estate industry was the backbone of Germany’s economy, contributing about 5% of the country’s GDP and one in every ten employment. Property was seen as stable and safe, therefore billions were invested in it, encouraged by low interest rates.

The run has now come to an end due to a dramatic increase in building costs and rates, which has caused developers to become insolvent as bank funding becomes scarce, agreements halt, and prices decline.

Commerz Real, the unit of Commerzbank, reported that it was expecting construction to start and that talks to “find a common solution” with Signa and Lupp were ongoing.

The Elbphilharmonie, a brand-new music hall, is located in the HafenCity neighbourhood, where Elbtower is situated. Aon, a risk counsellor, a local bank, and the Nobu hotel and restaurant are scheduled to be tenants.

A few weeks ago, Timo Herzberg, CEO of Signa Real Estate, welcomed viewers to the location as the building’s shell got closer to 100 metres (330 ft) in height.

“The distinctive concrete pillars now give an increasingly clear idea of the shape that Hamburg’s future landmark will have once it is completed,” he posted on LinkedIn.

Hamburg’s senator for housing and city development, Karen Pein, issued a warning to Signa, stating that they must adhere to the set milestones or face penalties.

The agreement “allows the City of Hamburg to dismantle the construction work performed to date, sell it to a third party for completion, or complete the construction itself,” she added in a press release.

(Adapted from USNews.com)

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