EUROPE – Investors, who continue to favour safe-haven locations for their investments in real estate, see German cities offering the best investment prospects, a new report has found.

According to Emerging Trends in Real Estate Europe 2013, a ranking of 27 European cities published jointly by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC), Munich remains the top city, followed closely by Berlin in second place and Hamburg in fifth position.

The report noted that investors are taking comfort from each of these cities' strong local micro-economic climate and resilient property market conditions.

In comparison, London, which is seen by many as Europe's ultimate safe haven market, is the largest riser in this year's report, taking third position, as investors continue to be attracted by the size and liquidity of its real estate market, the stability of sterling as a currency and its ability to stand alone from the rest of the UK and Europe's economic issues.

In total, around 80% of the investors surveyed believe the euro-zone crisis has presented their own business with new opportunities.

However, the report also stressed that this relative optimism was tempered by a general consensus that there will be little improvement in the overall European economy or the region's real estate market during 2013.

The report added that the tempered optimism was the result of real estate companies restructuring their business over the past five years and now beginning to deploy new strategies to profit in challenging economic and property market conditions.

This adaptation to the 'new norm' sees businesses mitigating risks wherever possible and focusing capital on specific assets and opportunities rather than adopting pan-regional or sector-specific investment positions.

Joe Montgomery, chief executive at ULI Europe, said: "Almost five years since the start of the financial crisis, real estate investors remain cautious about capital deployment and the availability of debt.

"As a result, investors are focusing on the harder to find opportunities in blue-chip cities such as Munich, Berlin, London and Paris rather than turning to secondary locations in search of higher returns."

Overall, the cities that are ranked highest are the larger Western European centres with international appeal and better economic prospects.

In contrast, the worst performing cities were those in countries at the heart of the euro-zone crisis or struggling to cope with the consequences of the 2008 financial meltdown such as Athens, Lisbon, Dublin, Madrid and Barcelona.

Simon Hardwick, real estate partner at PwC Legal, said: "Our report shows that real estate investors are approaching opportunities with a new mindset, conscious that the environment in which they are operating is 'the new normal' and is set to stay the same for some time yet.

"Investors face ongoing challenges but are cautiously optimistic about their prospects for the first time in many years."

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