'Silver lining' in property markets hard to find: ULI Germany summit

The million-dollar question as to where to find the ‘silver lining’ in the ongoing economic and property crisis in Europe is no closer to being answered, said Bernhard Hansen, chairman of ULI in Germany and CEO of German property group Vivico Real Estate, as he opened ULI Germany’s Urban Leader Summit in Frankfurt earlier this week.

'The crisis has shown us that property markets aren’t dead. However, quality has become very important,' he said.

Nevertheless, there are signs that the market is improving, according to Professor Norbert Walter, who runs his own consultancy firm, and who was formerly the chief economist at Deutsche Bank. 'It is very clear that 2010 is better than 2009. However, there are questions to be answered, such as can we afford other bailouts, like Greece; how will sovereign debt be handled going forward and who will buy it?' he said.

Germany is still regarded as a stable property market compared to many of its European neighbours due to its economic stability, said Thomas Beyerle, head of global research at Aberdeen Property Investors, citing unemployment figures. The year-to-year change in unemployment figures between January 2009 and January 2010 was just 5% in Germany, compared with 16% in France, 22% in Spain and an EU-27 average of 20%, according to figures from Eurostat and Aberdeen Research.

Going forward, there is also a growing feeling that 'capital' and 'culture' will be more closely entwined as cash-strapped German states do tie-ups with private investors to improve properties with a cultural component. German Chancellor Angela Merkel unveiled an eight-point plan earlier this month in a bid to help cut this year's EUR70 bn shortfall between spending and tax intake by an annual EUR10 bn until 2014, pushing Germany’s deficit to comfortably within European Union limits.

A closer relationship between 'culture' and 'capital' would mark a return to the past, said Dr Bernhard Scholz, a board member of Deutsche Pfandbriefbank, which was formed in mid-2009 by the merger of Hypo Real Estate and DEPFA Deutsche Pfandbriefbank. 'If you think back to Berlin in the 1920s, it was a cultural hub and a finance hub - these things belong together,' he said.

And private investors are getting in on the act, according to musical producer Friedrich Kurz. With the backing of unnamed private investors, he is building a theatre in Dresden in which to perform the latest musical from Enrico Garzilli, 'Michaelangelo'. The site has been provided by the local authority in Dresden with the understanding that a theatre will be developed on it. The project is believed to cost EUR 500 mln to develop and should be completed in 2013. Many such projects are now financed by the private sector as the public sector doesn't have the capital to commit to such ventures, said Kurz, adding that many theatres in London's West End are also bankrolled by the private sector.

There was much debate on the 'Capital follows Culture' panel as to whether cultural investment comes first and is followed by a horde of private investors keen to capitalize on it, or whether culture comes after financial investment in a city. Citing Bilbao in Spain - best known for the Guggenheim Museum - Ulrich Höller, CEO of property investment group DIC, said that it took around 10 years for culture and investment to come together. For Georg Allendorf, CEO of RREEF Germany, 'as worldwide business becomes more synchronized, cultural cities become more alike'.

But not all investors are convinced that there is a natural symbiosis between investment and culture. As Berthhold von Thermann, director of retail properties at Archon Group Germany so succinctly put it: 'Culture doesn't interest me at all - as an investor. I only care about the numbers.'