MIPIM: Germany’s safe-haven status maintains demand level

There is considerable pent up demand for investment in Germany although there has been a pause in new deals coming to the market owing to the war in Ukraine, delegates heard at Real Asset Media’s Germany Investment Opportunities briefing held at MIPIM yesterday.

Although the last two years have seen a reduction in cross-border capital flows into Germany, that has principally been due to the fact that it has been more difficult to transact owing to the covid health crisis, explained Marcus Lemli, chief executive officer and head of investment Europe, Savills, Germany.

“Germany is preserving its status as a safe haven and is, if anything, ranking higher than ever in investors’, preferences,” Lemli said.

Marcus Lemli.

However, he added that there is increased caution owing to the war in Ukraine. “We can just look around at Mipim and there is a lot of international capital which is simply missing and not active.”

But he said that this capital will enter the German market again. “I think that we’ll see an increase in activity over the next 18 months as investors are continuously diversifying their portfolios internationally.”

There has been no pause in the deals that are already in train according to Tobias Schultheiß, managing partner, Blackbird Real Estate, Germany.

The deals that are currently underway were started in December and for them it is “more or less business as usual”.

“Of course, we talk with our clients and investors about what’s happening in Ukraine, but it has not had any impact on these transactions.”

Lemli agrees that existing deals are progressing but he said that there has been some pause in new sales being initiated.

“We’ve had a very strong first two to three months of the year, with a lot of product coming to the market. Liquidity is really increasing. However, over the last couple of weeks, I’ve seen new sales being delayed.”

Tobias Schultheiß.

Investors are trying to gauge the effect of the Ukraine war on the market, he added, and are questioning whether their pricing is right. They also do not want to launch a sale into an insecure market or to appear to be selling under pressure.

“But that’s maybe the last couple of weeks where we’re seeing a little bit of a slowdown. Other than that, the pipeline is bigger than ever.”

In particular, the residential investment sector has overtaken offices as the most active asset class, Lemli added, with a €50 billion transaction volume last year.

This phenomenon has been notable in Berlin.

Annual double-digit price increases in Berlin resi market

“Berlin is a specific market,” said Gabriel Seifert, head of acquisition at Ziegert EverEstate. “We see double-digit price increases, year over year,” he said. “2022 saw the busiest start to the year for a very, long time,” he added. “Berlin remains a dynamic market for investors with no end in sight.”

Gabriel Seifert.

Seifert added that there are key statistics which explain the reasons for this: about 40,000 people relocate to Berlin each year; only about 6,000 new housing units are completed annually; and the residential vacancy rate in Berlin is consequently below 0.5%.

Lemli added that Berlin has taken over the role of growth leader in the German economy. It is building on its young population, quality of life, attractiveness for young international professionals, and it has a role in hosting internet companies. “That’s really the new growth driver in Germany. So I think with those fundamentals, Berlin is on the growth path for the next few years,” Lemli added.