Berlin’s largest development market offers great potential
Berlin, May 6, 2010 – Berlin’s development and real estate market managed to emerge from the crisis in good shape and offers high stability with promising growth prospects. Those are the results seen in an analysis carried out by the market research institute BulwienGesa AG. The focus of the analysis was the development of Berlin’s real estate market in 2009 and the city’s project development prospects for the years to come.
Berlin is home to the largest project development market in Germany and was the only city among the German A-cities* to show significant growth during the crisis year 2009. A total of 4.8 million sqm were registered to projects in the German capital this past year, an increase of 10 % on the previous year.
Ralph Küchenthal, Management Board member at Chamartín Meermann Immobilien AG: “Berlin’s real estate market proved a firm foundation during the crisis in terms of rental price development. It was able to do so while other European capitals such as London or Madrid recorded drops of more than 30 % in their prime office space rental prices.”
But the capital offers more than just stability: its planned infrastructure projects such as the new Berlin Brandenburg International airport along with a further influx of associations, organizations and companies from future-oriented industries are also generating major interest among real estate investors.
Berlin-Mitte is the gold standard within the capital
Just a glance at the analysis underscores the excellent position of the Berlin-Mitte region compared to the city’s other individual regions. Berlin-Mitte is by far the most attractive residential and office location in the German capital. The unique economy seen in “Mitte” is most notable in the prime rental prices with first-time renters and the maximum prices for condominiums, which substantially exceed the level of Berlin’s average prices of EUR 14.10 and EUR 5,400 per sqm respectively. The same is true for the prime rental prices in the office segment. According to the study’s findings, the prices for top office rentals in the sub region Mitte 1a are far and away the highest prices at EUR 20.10 per sqm.
“Berlin-Mitte has its own unique growth dynamic. It’s simply trendy to live there and the high demand from associations and other organizations for office space in premium locations around the government district is constant,” explains Heinz Meermann, Founder and Chairman of the Supervisory Board at Chamartín Meermann Immobilien AG, which is currently developing the largest volume in the capital with 200,000 sqm.
Residential segment dominates project volumes
The focus of project developers and investors is currently on the residential segment, which represents the largest share of Berlin project volumes at every development stage. There are multiple reasons for this according to the BulwienGesa analysts. Among them is Berlin’s growing population, which has been on the rise for years, and an increasing number of households stemming from structural requirements. These are countered by a small number of new constructions and this combination acts as a driving force behind the demand for living space in the capital.
According to the analysis, the strengths of Berlin’s office market lie mainly in its high stability and economic independence. Berlin’s low prime rent level shows the least volatility in comparison with other major European cities, making the city a more calculated opportunity for investors. The market’s stability in comparison to other major German cities stems from its balanced mix of industries among the companies headquartered there as well as the steady high demand for space from authorities, institutes and associations.
Attractive entry opportunities for investors
Berlin continues to offer investors high potential for value growth. The net initial yield at the close of 2009 was 5.6% – one of the highest yields among German A-cities. Financially strong family offices and insurances along with real estate and pension funds were the most active ones on the market during the crisis year. Their interest applies above all to the highly valued core real estate with long-term rental contracts to credit-worthy renters in top locations like Mitte 1a, Potsdamer Platz and Leipziger Platz as well as Charlottenburg. For 2010, the analysts from BulwienGesa expect higher cash flows in the real estate investment class and therefore increasing transaction volumes being seen – particularly in the area of residential real estate.
An executive summary of the analysis is available on request.