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Emerging Trends in Real Estate Europe survey for 2020 - Berlin is a hot market!
January 14th 2020
By Emerging Trends in Real Estate® Europe
Emerging Trends in Real Estate® Europe is a joint survey by PwC and the Urban Land Institute. Now in its 17th edition the survey provides an outlook on real estate throughout Europe for 2020 and the near-term.
Despite political uncertainty and rising construction costs, PwC still foresees an active European real estate market in 2020.
According to the experts, Berlin still is one of the best cities to invest in real estate in Europe; and it has been chosen again as the 2nd best real estate market in Europe in terms of overall prospects!
Berlin also features as the 3rd best city in Europe in terms of expected increases in rents and capital values!
In 2019 Berlin was 2nd behind Lisbon and this year it is 2nd behind Paris. In the years 2016-2018 it was 1st and in 2015 it was 3rd. All other cities have ups and downs throughout the years, while Berlin is always in the top 2 for the last 5 years.
This is what the report says about Berlin:
Has Berlin, the nonpareil of the European real estate market for several years, lost any of its allure? “Berlin has been doing well, but will it be double-digit growth for the next few years?”
Most Emerging Trends Europe interviewees remain fans. “Berlin is still the star and the shining light and the city everybody wants to be in. I tell people, ‘if you look at the last transaction that was done in Berlin, and you try to price the next transaction at that level, you’ll lose.’ You need to think ahead two years to where the market will be. It still has a lot of room to run,” argues a financier.
The consensus is that the German capital is still a good bet in both the short and long run. In the immediate future “rocketing” rental growth is expected to continue, in an office market where vacancy stood at a miniscule 1.4 percent in the middle of 2019, and where as much as 900,000 square metres of take-up is expected over the course of the year.
Residential rents have also soared, and the municipal government’s introduction of a draft law to cap the amount tenants pay for five years represents a rare cloud on the horizon. “Listed residential companies with exposure to Berlin have seen their share prices fall,” says a German investor, who warns that the measure will be counterproductive “because investors will shy away from the market and will not build, or invest into, new residential buildings”.
A number of interviewees believe that ultimately Berlin will emerge as the hitherto multipolar country’s pre-eminent city. “It is still in the process of making a quantum leap to a different role within Germany. It is no longer only the political centre of the country, but it is becoming more of an economic player,” says one. “Berlin is developing into the peer of London and Paris,” adds another.
Prices have risen rapidly to match or exceed those in other German cities, so investors may have to become savvier. “It’s the cyclically most advanced market in Europe, probably not far off where the US is, and so it warrants much more careful examination. That doesn’t mean you can’t make some money along the way. It just means you have got to be more selective and not just spray your capital around there,” advises an international investor.