No bubble in German resi, says new C&W partner

Cushman & Wakefield's new head of investment in Frankfurt Michael Morgan tells PropertyEU about the priorities in his new role.

Michael Morgan joined Cushman & Wakefield as partner and head of its investment team in Frankfurt on 1 June. He returns to the firm - where he worked from 1999-2003 - after a 10-year hiatus during which he worked in Germany for property group Hines and Shaftesbury Asset Management. During this period he was responsible for commercial property acquisitions and disposals with a total volume of around €1 bn.

Prior to rejoining C&W he was a board member at Dragon Real Estate, a boutique development and asset management advisory firm. Here Morgan, who is half German and half British and trained as a real estate economist, talks to PropertyEU about the priorities and challenges in his new role.

PropertyEU: Is Cushman & Wakefield a different company now to the one you left in 2003?

Morgan: Yes. When I left Cushman & Wakefield in 2003 it was going through a transitional phase and its name had just changed from Healey & Baker to Cushman & Wakefield Healey & Baker. Now I’ve rejoined the firm as Cushman & Wakefield so in a way I’ve gone through the entire repositioning process of the company as a global brand. More importantly, the face of the company has changed entirely in Germany with high-calibre appointments such as that of Frank Nickel as senior partner and head of the German business (in January 2013) and Martin Drummer as head of the office leasing activities (also in January 2013). So although we’re still in the same offices as we were 10 years ago the people are different. (Cushman & Wakefield’s German operations currently employ 180 staff in five offices in Frankfurt, Berlin, Dusseldorf, Hamburg and Munich, ed.)

PropertyEU: What was the main reason for rejoining the firm?

Morgan: The company is still in a bit of a transitional phase here in Germany and the recent hiring of Frank Nickel and Martin Drummer, two senior and very experienced people whom I’ve known since 1998, was the main driver for me to consider a fresh start. Plus the fact that this is a very exciting and challenging time for German real estate!

PropertyEU: What will be your main priorities in your new role at Cushman & Wakefield?

Morgan: My goal is two-fold. My main aim is to establish a stronger local investment presence in Frankfurt, to be more visible on the ground and to generate more deal flow in the Rhine-Main and Rhine-Neckar regions. And secondly, as part of a global firm, my aim is to create investment opportunities across Germany with my colleagues in Munich, Hamburg or Berlin and to work with them on broader deals.

PropertyEU: How will you go about realising these goals?

Morgan: We will build a bigger team in Frankfurt together with experienced players and we have a game plan, the details of which I cannot reveal. But we will shortly start becoming more noticeable on the market.

PropertyEU: Which property sectors will you be focussing on?

Morgan: I think 50% of our focus will be on offices and office developments and the remaining 50% on retail and residential investments and developments. Although the residential market in Frankfurt is not as hot as in Munich, the trend has been one of a substantial increase in rental values and purchase prices.

PropertyEU: Some people are warning of a bubble in the German residential sector. What is your view on this?

Morgan: I don’t think there’s a bubble, at least not yet. The pricing has been mainly influenced by the rule of demand and supply. There’s a clear demographic move towards the cities with people moving to the main cities Frankfurt, Hamburg, Munich and Berlin which is driving up demand. At the same time there is little supply; if you take Frankfurt there are a number of developments such as the Europaviertel project and Riedberg scheme on the fringe of the city which have seen a lot of activity in recent years but they are not enough to meet the demand. And of course there is cheap finance available at very low interest rates which is driving the market. So I don’t think we have a bubble yet; we are just catching up with the pricing in Germany which has been very moderate up to now compared to other countries.

PropertyEU: What about the redevelopment market?

Morgan: The office vacancy rate in Frankfurt is currently at 13% and many of these empty buildings are obsolete so there are definitely opportunities for conversion to residential and other uses.