The UK’s loss is Europe’s gain, as uncertainty over Brexit is driving capital to other locations in the Continent, delegates heard at Real Asset Media’s Capital Flows & Investment Opportunities briefing, which was held in Munich recently.
‘Sentiment towards the UK has really changed, the London market has fallen off a cliff and transactions have collapsed,’ Carsten Loll, Partner, Real Estate, Linklaters said. ‘Investors are turning to France, Spain, Italy but mostly to Germany which after a slow start to the year has seen a massive pick up in recent months and a record summer. We expect a very busy Autumn because the capital flow is just not stopping’.
Even the recent economic slowdown in Germany has not deterred investors, because the fundamentals of the real estate market remain good.
‘Now that the UK market has stalled Germany has become the largest and strongest market in Europe,’ said Claus Thomas, CEO, BNP Paribas REIM. ‘Capital is coming from international and domestic investors, but given current pricing levels German investors are more selective and they need to be disciplined in their approach and open to all sectors’.
The office sector in Germany offers the two advantages of a supply and demand imbalance and rental growth prospects. ‘Supply is amazingly low and, even though there has been significant growth recently, rents in Germany are still cheap compared to other markets,’ said David A. Ironside, Managing Director and Encore+ Fund Manager, LaSalle Investment Management.
The outlook for Germany is very positive and rents will continue to rise but the trend is for ‘the strong cities to get even stronger’, he said. ‘Munich and Berlin will continue to fare the best, no matter where pricing is, so my advice to investors is to stick to the strong markets’.