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German Commercial Property Stay High in 2017

The German property market is continuing to develop very positively. The key growth drivers are the sound economic situation, the robust employment market, increasing population figures thanks to inward migration and low interest rates. This is generating strong demand for commercial space and housing as well as considerable enthusiasm for buying German property among investors. Rents, but most notably property prices, are maintaining their upward trend while yields for commercial real estate and blocks of flats have been falling for around seven years.

The trend described above is particularly marked at top locations. In these areas, strong demand for office and retail space as well as the housing needed to house the rapidly increasing numbers of inhabitants are encountering a limited supply. Offices and homes, where new construction has failed to match demand for some time, are particularly scarce. There has already been a dramatic fall in vacant office space, which was so abundant a few years ago. However, a whole series of retail projects have been developed in response to the boom in city-centre shopping, meaning that there are now signs of saturation in the trend in rents.

Demand for German commercial property is expected to stay high in 2017, following one of its best years on record.

2016 saw investment in Germany commercial real estate total €52.7 billion, down 9 per cent year-on-year and the third highest year by volume on record.

German investors contributed a negative net investment volume of €4.3bn for the first time in the current investment cycle, according to some sources. 62 per cent of 2016’s transaction volume was attributable to German vendors, the highest proportion in the current cycle, i.e. since 2009.

Anyway, with foreign investment booming in Germany in the last year, demand is forecast to remind high during 2017. This is partly due to the low interest rate environment, which makes real estate attractive to investors, but also due to Germany’s ongoing status as a safe paradise. The only headwind facing the market is a supply shortage, which may saw transaction volumes this year suffer a moderate decline.

Hotel demand drives investment in Germany commercial property

Demand for hotel and industrial property is driving investment in Germany’s commercial real estate market.

Transactions in the first three quarters of 2016 fell 18 per cent in the first three quarters of 2016 compared to the same period of 2015, with investment volume declining to €32.5bn. Nontheless, the figure marks the second highest result since 2007.

The largest decrease occurred in the office and retail sectors, which declined 15 per cent and 46 per cent respectively. However, hotels saw investment levels soar 47 per cent, while logistics and industrial property also saw levels surge 17 per cent. Savills also highlights rising interest in nursing homes.

Berlin remains a particularly sought-after hotspot for both domestic and international investors. Appetite is fuelled by the healthy situation for owners in the lettings markets, with high occupier demand low supply set to push up rents.

However, the low supply is also holding back investment volumes, with transactions falling year-on-year in Berlin.

Projects from this area

K55, Berlin, Germany

This development  provides maximum living comfort  with efficiently designed floor plans.

The apartments  reflect current trends thanks to their compactness and  efficient use of the available space: “The return of the  small apartment – in recent years, housing construction  at sought-after locations almost automatically meant  building larger apartments. Now there has been a  marked shift. New apartments are becoming  increasingly smaller.”

The apartments meet high standards while remaining  affordable.

The project presents investors with price  advantages which can’t be found anywhere else at this  location and with these furnishings.

Tenants also  benefit: usually they are not looking for a particular  number of square meters, but rather have a specific  housing budget within which they are seeking the best  quality of living. Thanks to this project, they can afford  this, even in central Berlin.

Because the cost per square meter for apartments in  cities has increased significantly in recent years,  investors are beginning to focus on apartments with  small floor plans.

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Central Berlin - Residential Development, Berlin, Germany

The project represents a combination of modern, urban and cool apartment styles with different and unique layouts. A good mixture of offices and apartments (working and living balance) for every need and any taste is available. Each of them will provide an individual interior in this unique and historical location of Strausberger Platz and architecture of this GDR era ensemble. With their clean, compact and utilitarian floor plans these 55-to-99-square-meter units form an urban ambience, which lets one experience Berlin life right at the source.

  • Purchase prices start at approx. €195,000;
  • 5 commercial and 74 residential units with living spaces between approx. 53 m² to 99 m²;
  • Located in the centre of Berlin: Friedrichshain on the border with Berlin-Mitte and view to the TV tower;
  • The Buildings are under monumental protection and compete for World Cultural Heritage;
  • Rented units available as investment and free apartments for personal use;
  • Residential buildings were designed as ‘Working Palaces’ and remind of the gingerbread style;
  • Common property will be refurbished in 2015;
  • Parking spaces available.

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