The Brexit reality looks more and more like turning to mush. All bets are off.

The Brexit farce continues to baffle and astound in equal measure. The recent shenanigans between the Irish, the DUP in Northern Ireland,the Brussels contingent under Michel Barnier, and the Brexit team led by the hapless Theresa May to definitively settle the Irish/EU border issue, demonstrated in dazzling clarity the lack of a British plan as the deadline for leaving the common market looms ever closer.

But on one matter the British have a laser-like focus – one that is highly-attuned to efforts by their continental counterparts to try to snaffle a bit of their lunch. And that’s the role played by the City of London in the ongoing talks. Here, the City’s instinct for self-preservation and its long history as the most dynamic and efficient financial centre seems to ensure that it operates on a higher plain than its more flat-footed negotiating team when the question relates to Britain as a whole.

The Bank of England’s latest concession – in not requiring EU-headquartered investment banks to ringfence their capital and liquidity in the UK after Brexit, is definitely significant, if somewhat of a double-edged sword. In determining whether overseas banks are run in London as branches or subsidiaries, banks can increase or decrease their dependency on the Bank of England as regulator at will, remaining responsible to their home regulators and moving capital and liquidity around at their own discretion. Banks will be examining the ramifications of this very seriously.

While it is still a murky area, it would seem to us that it is yet another move that – at least in the short term – will discourage a mass exit from London by bankers to the hopeful alternatives of Paris and Frankfurt.

Listening to Theresa May – and more disconcertingly, her chief negotiatior David Davis – it seems ever more improbable to imagine that their battlecry of “”Brexit means Brexit” will have much real meaning when 2020 rolls around.  

The Irish example – now, after much obfuscation by the swashbuckling Davis, enshrined in a legal formulation which leaves no room for doubt as to what the British have committed to – has implications for all of Europe. And what it presages is something that falls a long way short of the ‘clean cut’ from the common market and the customs union that enthusiastic Brexiteers envisage.

Meanwhile, back here at the Berlin ranch, JLL’s annual press gathering to run the rule over the German real estate market, left most of us wondering – just what further questions can now be asked as to the economic state of the nation, given the all round good news swaddling the entire real estate sector.

After 28 consecutive quarters of growth, what is not to like about the real estate landscape? This was the unmistakable message from JLL Germany boss Timo Tschammler, supported by his senior research team. With global capital washing across the country, a still-benign interest rate scenario, and shortages and bottlenecks characterising all the most in-demand sectors, it’s been happy days again for most participants in 2017. With little on the horizon to disturb prospects of a downturn after the holiday season, yields at rock-bottom, and a willingness by tenants to succumb to increased rent demands, any lurking “black swan” is most likely to come from a fully unforeseen geopolitical event. Of course the cycle is very, very mature, and there’s no telling how people could react to being suddenly blind-sided out of left field.

Still, what else can investors do? They are wary of retail investment, as rents are feeling the pressure of online commerce – never more apparent than this year. REFIRE’s local DHL driver used to have our street and six others in the neighborhood as his daily delivery revier. Now it’s our street, and one other.

But as we report in this issue, office rents rose strongly across Germany this year, aided by Berlin (11%), Stuttgart (5%) and Munich (4%) – while office vacancies are now at their lowest level for 15 years. Overall, investment in German commercial property will hit a new record of €55bn this year, with €30bn of that in the Big 7 cities, with foreigners responsible for fully half the volume. Asians alone make up 10% of the transaction volume.  

While it’s good news for Germany, the UK has been proving itself remarkably robust, with commercial transactions up 28% this year, nosing back ahead of Germany over the first nine months. Many German commentators, convinced after the first convulsions of the Brexit shockwave, that the British had dealt themselves a fatal blow, are slowly coming round to the view that there’s plenty of life in the old dog yet.

But with so much largesse still being distributed, who’s complaining? There’ll be time later to look back nostalgically on what will surely be seen as the “good old days” – but that time ain’t come yet. The tide’s in, and everyone’s out swimming.

Here at REFIRE, we’re happy enough to put our feet up over the festive season. We’ll be back in January for our thirteenth year of analysis and reporting on the multi-layered, multi-faceted and ever-changing German real estate market. Meantime, we wish all our readers and friends a very happy Christmas.

December 20th, 2017