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UK falls behind Germany as Europe’s most active commercial property market

There’s few nations out there quite like the UK when it comes to being obsessed with the property market but the latest research suggests otherwise. Last year, Germany overtook the UK as Europe’s most active commercial property market with transactions totalling €59 billion.

Investment volumes may have experienced a year on year decline of 14% but it has been reported that Germany became Europe’s refuge last year, due it to a combination of its strong economy and political stability (stable in comparison to other European countries, anyway) and the diversity of its property market.

At 55%, of over half of Germany’s total sales volumes were spread across seven key cities in 2016. These cities included Frankfurt, Munich, Berlin, Hamburg, Cologne, Dusseldorf and Stuggart. This diversity was said to be one of the main attractions for investors as each of the seven cities boast noticeable differences in terms of occupational demand and this is something that makes the German market unique to other markets. In addition to this, second tier cities also attracted unprecedented levels of investment, with Leipzig at the forefront of this.

Of investment transactions that took place last year, over 60% included German buyers as overseas investors were forced out by competitive pricing. Occupier demand remains strong, Berlin and Munich both recorded rental growth whilst rents in Frankfurt remain high.

In recent years, Berlin has emerged as one of the creative hubs of Europe, surpassing its rival cities. As result, the German capital has scooped record levels of office occupancy for the past three years. This is had an untold positive impact on the economy making it very attractive for investors as sales totalled €5.7 billion in 2016.

Though Berlin is not Germany’s only major success story, Frankfurt is the leading financial centre for mainland Europe. Home to the European Central bank, the city is now home to over 230 national and international banking institutions and last year, it witnessed the highest level of leasing activity since 2007’s global financial crisis. In total, a staggering 530,000 square metres was let. Regarding Frankfurt’s commercial property sector, it received around €4.7 billion in investment and despite a somewhat of restricted availability of office investment stock, the office sector still managed to attract €3.3 billion in capital.

Munich is also doing its bit got the German and European property sector and economy. It is the country’s second largest employment centre and in total, around 30,000 are created everywhere meaning the demand for office space is heightened. This was evident in the 780,000 square metres of office space that was let last year, one of the highest totals on record. Further to this, with sales accumulating to €5.5 billion, Munich was the second most popular destination in Europe with investors.

It’s now certain that Germany is one of the most advanced economies in Europe and perfect to invest as it is apparent the country is the number destination for real estate investment in Europe. The future of Germany’s economy is looking strong and it is leading the recovery for the continent following a hard few years. That said, with a national election on the horizon in just four months, investors may now take a more cautious stance, though this will only be short term.

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