Eastern German commercial RE investment doubles over 2014

REFIRE tuned in to listen to Niklas Karoff, the CEO of listed eastern German commercial property specialist TLG Immobilien, in a conference call with journalists on the occasion of TLG's annual market review "Property Market Berlin and eastern Germany".

Given TLG's focus on the region and historical connection with both the capital city and the major cities of the six eastern states, we invariably learn a lot about market trends, new developments, and (sometimes surprising) investor behaviour.

Berlin itself, as the capital city, saw its highest transaction volume in 2014 since the boom year of 2007. Commercial transaction volumes grew over 2013 by 19% to €4.28bn, exceeding the ten-year average by 27%.  Office transactions made up 40% of the volume, "not only in prime locations, but especially in established B-locations", said Karoff. "Berlin is currently the focus of demand for domestic an international investors."

Overall, commercial property investment into other eastern German cities doubled to €2.7bn, helped by the rise in tourism and an otherwise buoyant economy. Leipzig reported €516m, a 50% increase, with most deals done in the retail (37%) and office (27%) sectors. In Magdeburg, volumes rose 81% to €156m, in Dresden by 9% to €336m, reflecting rising tourist numbers and more spending on retail. Dresden’s overnight stays rose by 7.6%.  Berlin has become a true tourism magnet, with 12m tourists and overnight stays rising 6.5% to 28.7m, ranking it third in Europe behind only London and Paris.

In its ranking of the top ten most dynamic locations in Germany, the Institut der deutschen Wirtschaft (IW) in Cologne includes Berlin, Leipzig and Erfurt. Rising populations again and falling unemployment are having a positive effect on demand for real estate, with sharply falling vacancy rates.

Retail, too, is enjoying high demand. Berlin is attracting more and more international retailers and, next to Munich, now counts as one of the ten most attractive commercial locations in Europe. Due to increased demand for retail space in 2014, prime rents in the capital reached €300 per sqm. Even Potsdam, Dresden and Leipzig recorded rising rents, the highest to be found in the Leipzig commercial centre where the rate for smaller retail space stood at €130 per sqm.

The TLG annual report analyses market developments in the principal eastern German cities of Berlin, Dresden, Leipzig, Erfurt, Jena, Magdeburg, Potsdam and Rostock, based on about 2,000 analyses of internal and external date. You can download the complete report at www.tlg.de