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‘The German market is changing dramatically’

Dr. Carsten Loll, Partner, Real Estate, Linklaters

Dr Carsten Loll, Partner, Real Estate, Linklaters, Germany, tells Real Estate Day that there is a shift underway to a more operational model where brands become important, as shown by the meteoric rise of WeWork in Germany, which is doubling the office space it operates

There are big changes underway in Germany’s real estate market, Carsten Loll, Partner, Real Estate, Linklaters, Germany, told Real Estate Day.

‘The German market is changing dramatically,’ he said. ‘We are moving from a bricks-and-mortar orientation and yield orientation to a more operational model, which you can see not only in the office space, where WeWork is certainly the first port of call, but also in other sectors like senior living and student housing. Operators become a brand and these brands will be much more successful than traditional players’. 

The growth of WeWork has been ‘an extraordinary story’, he said. They are the biggest tenant of office space in Manhattan and in London and now they are operating in Germany. ‘They have more than ten centres open and undergoing a phase of hyper-growth so there are at least another ten centres to come and in terms of space that means a lot, especially if you look at slightly overheated markets like Munich where there’s hardly any office space left’.

The market is so competitive because most international investors are chasing the same product, which is core offices in the top seven cities and logistics.

‘I lost so many finals and semi-finals this year in bidding processes that it is a pain,’ said Loll. ‘What makes me sceptical about the market is that the pricing is too high and there is a lack of product’.

Steep pricing and a competitive environment do not seem to deter foreign investors, who are coming ‘from all over the place,’ he said. ‘They come from Asia, especially Singapore and South Korea and now possibly Japan, but the old investors from the US and the UK are still very active’. 

Germany is still seen as the safe haven in Europe and this reputation has been boosted by the problems the UK is experiencing with Brexit. Turnover in commercial real estate was over €60 bln last year and this year’s figure is likely to be equally impressive. ‘We will stay the leading investment destination in Europe,’ Loll said. 

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