Demand sees further rising office and residential prices – study

Germany's rental and sales price levels are headed for continued price rises given the ongoing high demand for office and residential investments, and a lack of suitable supply. Investors should look to the periphery for better opportunities, while the whole German real estate industry continues to benefit from the positive economic climate - despite Brexit, according to the latest half-yearly "Investment Market Germany" report from specialist real estate consultants Wüest & Partner Germany.

Germany's economic growth is running at 1.7%, employment levels are rising, consumption is rising by 2% with inflation at nearly zero. According to Karsten Jungk, CEO and partner at Wüest & Partner Deutschland, "The current economic client is all-round positive and is impacting on all segments of the German real estate market. The associated general rise in prices can only be held in check by a commensurate rise in supply."

Office turnover in Germany last year rose 20% over the previous year 2014, to the highest level since 2010. All Germany's Big 7 cities saw rising numbers in employment and falling office vacancy levels. Peak rents rose by 2%, and by up to 9% in Berlin. Peak retail rents rose by 1.2% on average nationwide, while retail investments rose by 90% largely driven by foreign investors, who made up more than half of the €16bn transaction volume, confirms the report.

The Wüest & Partner report shows how tight the market still is for rental and investment apartments, particularly in the biggest cities. The increase in residential investment of nearly 90% to €24bn was due in large part to high-volume transactions, which made up three quarters of all investments. But supply is still falling well short of demand in the big cities, under further strain because of the large number of refugees. "We'd advise investors in residential to take a much closer look at peripheral locations and in areas with good transport infrastructure on the outskirts of the bigger cities", said Jungk.