As UK continues to deal with Brexit and its uncertainties, Germany has gained popularity among real estate investors.
According to BrickVest鈥檚 fourth quarter commercial property investment barometer, 33% of professional real estate investors have suggested that Germany is their preferred region. This compares with UK鈥檚 27% during the same period.
This is the first time that Germany has been chosen as the number one region and ahead of the UK, the online real estate investment platform said, adding that it expects the trend to continue throughout 2018.
The research, which polled 3,500 professional real estate investors, also revealed that UK, French, German and US investors are now less favourable towards the UK than 12 months ago.
Emmanuel Lumineau, CEO at BrickVest, said: 鈥淥ur latest barometer reveals that Germany has overtaken the UK as the location of choice to invest in commercial real estate.
鈥淚nvestor risk appetite continues to rise as commercial real estate offers opportunities, especially in the form of debt-like investments which offer good risk-adjusted returns in a volatile market environment.鈥�
Germany is becoming more fashionable among international real estate investors and will need to be ready to meet demand, according to the founder and chief executive of JLL鈥檚 German residential partner, Zabel Property.
Thomas Zabel said 鈥渁 little change in London can result in a huge change in cities like Frankfurt鈥�. He added: 鈥淏erlin and Frankfurt can benefit from just a small amount of relocation.鈥�
Investors are still interested in UK real estate Zabel said. 鈥淲e are talking to the same clients worldwide. All of our clients have bought in London would do it again,鈥� he said.
鈥淣one of them have said no to London because of Brexit. Yes, there was a pause after the Brexit vote, but clients do not feel threatened by Brexit.
鈥淲e now have a second strong market in Europe. Germany is booming, while London will continue to be strong.鈥�
For the first nine months of 2017, internal analysis by Engel & V枚lkers Investment Consulting and Engel & V枚lkers Commercial have revealed that throughout Germany, investors are currently paying an average premium of 1.6 times the annual basic rent to acquire a residential portfolio.
Engel & V枚lkers, which analysed 600 transactions 鈥� individual and portfolio 鈥� with a transaction volume of 鈧�2.2bn, revealed that the 鈥渞esidential property market is now a sellers鈥� market and residential portfolios a very scarce commodity鈥�.
Kai Wolfram, managing director of Engel & V枚lkers Investment Consulting, said: 鈥淏ecause the investment pressure is so high, institutional investors are prepared to pay premiums for large investment volumes. That was not yet the case two to three years ago.鈥�
The population of Frankfurt is 700,000, roughly the same amount of people working in London鈥檚 financial and banking industry, Zabel said.
鈥淓ven if 鈥� worse case 鈥� 10% of London financial sector employees left, who鈥檚 to say how many would go to Dublin, Paris or Frankfurt? Let鈥檚 say a third,鈥� he said.
鈥淩ight now, the city of Frankfurt would not have enough space to deliver the offices and apartments for all these people that 鈥� worse case for London, best case for Frankfurt 鈥� would need.鈥�
Frankfurt needs five years to absorb the demand and is not prepared, because speculative development does not exist in Germany, Zabel said.
According to Optimum Asset Management, Berlin, the German capital still offers excellent value provided a proactive approach is taken.
The boutique real estate investor with 鈧�1.5bn in assets under management, and an early entrant to the Berlin property market in 2006, said the city has changed considerably in recent years, but remains one of the most compelling market opportunities and appealing cities in Germany.
鈥滲erlin is booming and offers great value to businesses. It is one of Europe鈥檚 most dynamic destinations for tech companies,鈥� Optimum said.
鈥淭he city is also benefiting from growth in tourism and the continuing transfer of government ministries from other parts of Germany.
鈥淩esidential prices have been rising but remain good value compared to other major capitals such as London and Paris where prices per square metre are five or more times higher.鈥�
