Germany is still a magnet for investors despite high prices and scarce product, delegates heard at Real Asset Media’s European Outlook Briefing, which took place in New York last week.
‘Germany has become so expensive that it is crazy,’ said Carsten Loll, Partner, Linklaters. ‘And even if the investor is willing to accept those prices, there is no product to buy. Despite this, there is still huge interest in Germany from foreign investors.’
Despite the recent economic slowdown Germany is seen as a safe haven mainly because, as Loll put it, ‘its politics are so boring and they have no impact on the market’.
There are some concerns that Berlin has become excessively popular with foreign investors and that its star, which has risen so fast, could crash and burn. ‘I don’t see any German companies moving there, no bank has moved there,’ Loll said. ‘That would be a real game-changer for Germany as well as for CEE, because if you look at the map Berlin is closer to Warsaw than it is to Brussels.’
Investors should be cautious, agreed Guillaume Turcas, Managing Partner, Faro Capital: ‘Berlin is a great city, but if you look at the office tenants they are Zalando or WeWork and you think that if the downturn comes then you are not going to get the rent paid by these guys’.
Investors with a short to medium-term horizons should take heed, but investors with a long-term horizon can invest with confidence because the city has a great potential, Loll said.
‘Berlin is the only German city with the capacity to become a London or a Paris over the long term,’ he said. ‘It is not there yet, not by a long way, but it is changing fast and moving in the right direction.’ On the plus side, ‘it is the most international city in Germany, everyone speaks English, there is a strong tech sector, it has a great vibe and a lot of potential.’
On the minus side, ‘rents are high and getting higher, there is a lack of space, although there is some development coming. So I would be sceptical about the next five years, but beyond that Berlin could really work’.
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