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Emerging Trends in Real Estate Europe - Berlin top city to invest in 2021 according to the experts
April 20th 2021
By Emerging Trends in Real Estate Europe
The COVID-19 pandemic has been described as a classic black swan event that no one could have predicted. Though the global economy is expected to recover from this exogenous shock and eventually resume its prior course, for the real estate industry, COVID-19 is a game changer.
Much of life has been altered dramatically, but Europe’s real estate industry is keeping faith in the cities it has been backing in better times. Despite pandemic-induced lockdowns, plunging economies,and an uncertain future, the ranking of the overall investment and development prospects for cities in 2021 is relatively little changed from last year’s. Berlin has moved up one place to retake the number 1 spot, toppling Paris, which drops to third. Germany’s capital is the city investors want, especially its offices.“The effects on the office property market are not particularly drastic.One of the main reasons for Berlin is the upward potential in rents,” says an investor.
Amid the rapidly shifting anxieties and uncertainties of the pandemic, capital is inevitably favouring markets that offer defensive, low-risk characteristics. For many investors, the qualities that made the German cities attractive in a latecycle market are just as compelling in a downturn.
Frankfurt, Hamburg, and Munich – ranked numbers 4, 6, and 7, respectively – are also viewed as benefitting from Germany’s economic strength and effective navigation through thepandemic.
Their appeal to Emerging Trends Europe’s constituency is also enhanced by the widespread perception that the German government has mustered one of the most effective national responses to the virus.The relative health of Germany’s economy – combined with low vacancies for office, residential, and logistics property in its major markets – bolsters investors’ confidence that income will be resilient in the face of the crisis. Says one interviewee: “This is a period of risk-off. Therefore, it is important that whatever we buy, the cash-flow quality is very strong, so Germany will do very well.”
Relative to other major European economies, Germany is faring well in the crisis. An already-robust national balance sheet has provided the ammunition for that response. “On a relative basis, Germany has had an exceptional crisis,” adds an international financier. “If you look at the forecast, German unemployment is expected to go up by barely 100 basis points.” Germany is “as close as you can get anywhere to pre-COVID conditions”, says a global player.
“For good quality assets, in Germany at least, there is still a huge appetite from the investor side, because money needs to be deployed, and people are looking for quality,” a pan-European investor says. Adds another: “It is extraordinary to see the Real Capital Analytics data from Q2 2020, where investment volumes in the German market were up compared to last year.”In the midst of an economic downturn, liquidity is also highly valued and Germany’s cities offer that virtue.
Germany’s three other major markets remain firmly cemented in the top 10.
“The theory is that Germany is in better shape than most of the other economies. And therefore, in a way, if you’re going to buy anywhere, you buy in Germany,” says a pan-European fund manager.
Obtain more information about Berlin and Investment opportunities in Germany on our website: www.berlinestates.co or contact us directly +357 25754514
Emerging Trends in Real Estate - An uncertain impact - Europe 2021
A publication from PwC and the Urban Land Institute