International investors are more likely to consider going into regional cities in Germany than similar second-tier locations in the UK, according to leading real estate experts.
International investors are more likely to consider going into regional cities in Germany than similar second-tier locations in the UK, according to leading real estate experts.
The strength of German real estate lies in its stability and the wide range of large to mid-size city markets with long leases on offer. Thanks to strong demand, more regional cities are outpacing the big-7 German markets in terms of rental growth, a PropertyEU investment briefing on the UK and Germany heard during the Provada real estate fair in Amsterdam last week.
By contrast, for many international investors the UK begins and ends with London. 'In Germany, investors will easily go to Mönchengladbach. When we show them long leases there they love it. If you show them Liverpool or Manchester or Glasgow which provide good opportunities, they say no, we want to go to London. And we look at London and it is too expensive,' said Didier Unglik, chairman of investment manager Etoile Properties.
The UK capital is the most liquid and transparent market in Europe. But its reliance on huge flows of foreign capital, accounting for up to 80% of annual investment in London in recent years, means it can be quite a volatile market, said Robert Stassen, director of capital markets research for the UK & EMEA at JLL.
Indeed, low supply is pushing prices skyward and yields to the floor in the UK capital, Boris van der Gijp, director of strategy & research at Syntrus Achmea Real Estate & Finance, noted. This is leading more investors to gravitate towards Germany.
Many of the largest investors are indeed focused on London but medium-to-small players will venture further, agreed fellow panellist Clarissa Alfrink, manager business development, Bilfinger Netherlands. 'The large sovereign wealth funds say: let's go to London, a market where there is limited supply. But we are seeing smaller German and Dutch investors who consider Manchester and Liverpool as possibly offering interesting opportunities,' she said.
