My opinion on the German residential real estate market.

  After arriving in Germany last week it quickly became apparent that the  efficiency Germany is so famous for was ever present.  With that said the infrastructure at the Berlin airport, Tegal, is an indicator to me as to why Berlin house prices are a fraction of its major European rivals (London, Paris) and why even after solid growth over the last 5 years there is still a long way to go for capital values to catch up with its counterparts.

The lack of direct long haul international flights has staggered me.  I asked myself how can international business’s make Berlin their European home if they cannot fly directly in or out?  The short answer is, they can’t!  Having said that, I don't think it will be too long before they do.  In particular, businesses that are connected to or already in the creative sectors.  Media and advertising companies will also thrive in such an environment, and in time, it will be the destination of choice for start-ups, although it is already competing for that crown in Europe. 

Many will feel Frankfurt is the location of choice for investment if you think about German real estate, with its connection to Asia in terms of transport links and as it’s the financial centre that backs up London and houses the ECB.  Whilst both make for stable growth and a stable market, the airport and infrastructure surrounding Frankfurt are already developed; they run smoothly and efficiently and don't have room to grow.  Many, if not all of the major world banks have a presence there but again does that leave much more room for continued upwards growth?  I would argue Berlin has more potential.  

I see Berlin’s current Airport set up as the biggest stumbling block it faces.  For example, lack of parking , not enough space and less than ideal transport links to the CBD (yes, I’m spoilt with the Airport Express in Hong Kong).  These are issues that do have an effect on current prices and they also affect future demand and of course that affects future growth and the evolution of any city.  Therefore these are issues that need addressing!

Within 12 hours of being in Berlin not only had I eaten half my body weight in meat and pickles, my concerns and then questions were starting to be answered.  It seems that things are changing.  Transport links throughout the city to connect commerce are being upgraded as a priority by the City and State, as more and more foreign investment comes to Germany.  Areas that were left to over grow and showing signs of becoming run down are being taken on my small business and regenerated.  Berlin as a city seems to understand the attraction it has, the current affordability of their City and most importantly what they have to offer the creative, artistic and modern world of business.  First and foremost they are currently building a huge new airport that will serve all the International centres of commerce as well as many of the tourism hubs, directly and most importantly, on a daily basis.  The airport is now close to completion with a target date of 2018 to complete internal works and begin serving the city.  There will also be an Airport Express to transport the thousands of people a day directly from the airport to the CBD, with ease.  New lanes for taxis and buses are being discussed to feed the airport.  Parking structures, retail sites and major International hotels are already popping up all over the City and a large regeneration area directly behind the central train station will bring another centre of commerce, retail site and more much needed mid to high end residential.

What excites me personally , even more so than the above infrastructure changes, is the fact that Berlin is probably THE most exciting, diverse and creative city I’ve been to over the last 12 years of viewing International real estate and travelling the world. The reason this excites me as an investor is the result of creating an atmosphere that Berlin currently has, meaning you automatically become more attractive to a large proportion of Europe and the rest of the world’s young, ambitious and dynamic talent.  People want to live there because the cost of living is so affordable. They want to live there because that's where the talent is (similar likeminded individuals that can share and absorb from one another) and they want to live and work there because it’s modern, green and vibrant! 

It’s clear to me that Berlin is a ticking time bomb of potential.  If the Government and state deliver on what they have started and targeted, which I believe they will, it is only a matter of time before Berlin starts to aggressively catch up with its European rivals when it comes to prices per sq foot.

For further information or to discuss the above or Berlin and Germany in more detail, please feel free to message or email me at Mark.Elliott@ap.jll.com

Images courtesy of JLL Germany, ppa. Julius Stinauer MRICS