Berlin and German cities too, the best bets for real estate investments

6 years ago - Published in Finance, Technical Analysis

The latest PwC/ULI Emerging Trends in Real Estate Europe report sees Berlin take the top spot for real estate investment and development for the fourth year in a row.

Frankfurt has risen to second place after a year of solid growth, much of which has come from the financial sector in the aftermath of Brexit. Tied with Frankfurt is Copenhagen, whose booming residential sector has captured the attention of the international real estate industry. At number four is Munich, which—while expensive—has remained an attractive market for investors and developers alike. Madrid, benefiting from positive office rental growth prospects, has jumped four places to take the fifth spot.

Real estate investment in Germany in the last year came to €68 billion ($79 billion) up from €54 billion last year, and outstripping the UK’s €66 billion worth of investment in the last year.

The annual forecast is published jointly by the Urban Land Institute (ULI) and PwC and the report is based on the opinions of more than 800 property professionals.

According to the report, the property industry is cautiously optimistic about its European business prospects in 2018. Around half of survey respondents predict that profits and headcounts will increase next year and 42% expect an increase in business confidence—a 10 percent jump from last year’s results.

Gareth Lewis, PwC real estate director, said, “Against a backdrop of a brighter general economic outlook and stronger occupier demand across much of Europe, our interviews with industry leaders reveal a sector that is looking more closely at disruption and beyond the traditional timeframe of the property cycle. Businesses are being challenged to remain relevant in the face of increasing disruption, to respond to emerging new market entrants and to seize the opportunities presented by forming new partnerships and business models.”

However, several issues are still proving worrisome for investors. As in the last few years, the key concern for Europe’s real estate industry centres on the availability of suitable assets. More than 75 percent of those surveyed believe that investors are taking more risks to achieve target returns; however, many key industry players indicated a more measured approach to risk-taking in 2018.

Brexit also remains a challenge for the real estate industry. While the degree of Brexit-related pessimism has decreased considerably since last year’s report—and few question London’s long-term status as a destination for global capital—the uncertainty surrounding the terms of the UK’s departure from the EU has been a source of frustration for real estate professionals.