Assetz® News - Germany's commercial promise

Germany's commercial promise

7th April 2008 |

The fall of the Berlin Wall may seem a long time ago, but the tumultuous events of the fall of 1989 and the following year's reunification have had a marked economic effect on the country. The difficulty even for an economy as strong as the West German one was in absorbing the inefficient, technologically and structurally weak east has led to a prolonged period of economic misery.

During this time German property, whether residential or commercial, has had its metaphorical nose pressed up against the window, watching the party going on as other countries have enjoyed a boom.

Now, however, all this appears to be changing. On the one hand, many of those happy markets are now suffering from the morning after of price corrections and a credit-crunching hangover. On the other, the German economy is starting to bounce back.

The second point was emphasised by Henry Powell-Jones, associate editor of overseas property investment magazine Jet-to-Let. He noted that: "Germany has only just recovered economically from reunification, which is estimated to have cost €1.5 trillion (£1.19 trillion) Germany is still the world's largest exporter of goods and the fundamentals of their economy remain strong and, crucially, unemployment is now falling."

All this, he said, meant that investor confidence was rising. Even Berlin has just turned in its first-ever budget surplus.

Mr Powell-Jones went on to say that there was a recognition among investors that the German government had "spent its money more wisely than many other European governments", while across the country, the prevailing view was that "many German cities house prices are still either near to, or at the bottom of their cycle".

This picture of investor confidence was given a boost last month when the Emerging Trends in Real Estate, Europe 2008, jointly published by the Urban Land Institute and PricewaterhouseCoopers, stated that: "Despite all the turbulence in the international markets, the German property market is still on the upturn." Berlin, Frankfurt, Hamburg and Munich were all listed among the top ten cities to invest in, with Hamburg and Munich being rated highly for office property potential.

Of course, the proof of Germany's appeal is in the investments that are actually being made there, rather than just the glowing words in a report. But large-scale investment funds are being set up to acquire German property. For instance Easier reported last week that Fidelity International's Real Estate Business was kicking off its expansion into the European market by buying up an office in Munich for €17.85 million.

Mentioning that Frankfurt was another location the company was keen on, Fidelity's director of European real estate Keith Sutton said: "Finding the first German property for our Pan-European Real Estate Fund in Munich is no coincidence - again, it demonstrates the attractions that we are currently seeing in this city."

Another example came this week from Irish investors Luke and Brian Comer, with the brothers setting up a €200 million fund to invest in commercial property in Berlin and Munich in the expectation of securing 7.5 per cent yields, the Sunday Post reported.

So with the investors heading back into Germany, it may just be that a country that has endured a large hangover of its own since the heady days when the wall crumbled is now feeling distinctly sprightly and offering investors a lot of opportunities.