EMERGING TRENDS German cities most attractive places for property investors

Germany's cities have strengthened their credentials as the most attractive destination in Europe for real estate investors, according to an analysis of urban development.

Hamburg has joined Berlin at the top of the Emerging Trends league table, published by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC), with Munich joining them in the top 10.

London, which was 10th last year, dropped out of the top 10, but Birmingham retained its sixth place, indicating that investors are looking beyond the UK capital into the regions for better growth prospects, the report said. The Irish capital Dublin was pushed down from second to third by Hamburg.

Copenhagen moved up from seventh place in the 2015 ranking to fifth this year, while Lisbon and Milan also rose as the recovery spread to southern Europe. Athens, ranked 5th last year, has also dropped out of the top 10.

‘Investors are getting more creative in trying to access future prime assets at reasonable prices through more focus on alternatives and development,’ said ULI Europe CEO Lisette van Doorn. “They are taking more risks in the short term to fulfil their long-term objectives for core assets.’

The report found investors are increasingly looking to alternative sectors for returns, with 41% of respondents saying they would consider investing in sectors such as healthcare, hotels, student accommodation and data centres. In 2015 the proportion was 28%.

Development is also expected to create value in 2016, with 78% of respondents citing it as an attractive way to acquire prime assets.

ULI said ‘ground-level disruptions’ such as rapid urbanization, the development of technology, social change and demographic trends were making cities, rather than countries, the main focus of investors’ attention.

‘Some of the industry’s biggest challenges right now are how to become less about brick and mortar and more about service and the implications this may have for the traditional business models of real estate operators,’ said Van Doorn.

‘Low interest rates, and the weight of capital bearing down on European real estate, mean that most remain bullish about the industry’s business prospects in 2016,’ said PwC director Gareth Lewis. ‘But they acknowledge that the global field for real estate is increasingly competitive, and if the current wall of capital recedes, there will be an even stronger focus on underlying market fundamentals, active asset management and operational skills.’

Top 10 European Cities for Existing Property Investments in 2016 (2015 position in brackets)
1. (1) Berlin
2. (4) Hamburg
3. (2) Dublin
4. (3) Madrid
5. (7) Copenhagen
6. (6) Birmingham
7. (9) Lisbon
8. (12) Milan
9. (8) Amsterdam
10. (11) Munich