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Anna Russell
German Investment Market
The German property investment market has been impacted by interest rate rises and high inflation. The European Central Bank's interest rate in July 2023, for example, was 4.25% and was unprecedented in the Eurozone, which typically experiences low rates (Schularick, 2023). These challenging economic conditions have negatively affected the real estate sector, increasing construction and finance costs and resulting in fewer development starts and a greater number of company insolvencies (BNP Paribas Real Estate, 2024). This increased risk has impacted yields, reducing returns for investors. General investment activity has stalled due these unfavourable conditions. JLL (2024b) notes that there has been a dearth of portfolio transactions, while the number involving single assets have remained stable.
Both JLL (2024b) and Lemli and Pink (2024) expect that the economic climate will become more favourable, but they also acknowledge the impact that geopolitical events have had and will continue to have on the market, such as the ongoing war in Ukraine. Germany has experienced significant supply chain disruption and this is increasing the cost of building materials, affecting development project viability.
Investors are currently focusing activity on logistics and living (residential and healthcare) and 40% of transactions are taking place in these sectors (JLL, 2024b). Residential property prices have fallen, with Nemecek, Hoegl and Schenk (2023) noting that house prices have fallen 27% since the last peak in the property cycle and they also suggest that this presents a "unique opportunity" for investors to enter the market. On the commercial side, JLL (2024) also notes that there is increasing demand for physical retail, which counters the ongoing growth of e-commerce within the sector.
Yields - Commercial (Q1 2024)
Shopping centres - 5.7%
High street retail - 4.3%
Offices - 4.4%
Yields - Residential (Q1 2024)
Multi-family house - 3.6%
Source: Lemli and Pink (2024)
Berlin Residential Market
Market overview
Buying
Purchase prices for residential property have fallen in the past year due to construction cost and interest rate rises (Berlin Hyp and CBRE, 2024, p. 3). In the city as a whole, purchase prices of apartment buildings have fallen by 11.7% on 2022 and in Mitte by 5.7% (Berlin Hyp and CBRE, 2024, p. 12). The location of this project, however, is its strength, as the Mitte district had the highest number of apartment building purchase offers in 2023, as well as the third highest median price per square metre (Berlin Hyp and CBRE, 2024, p. 12).
Renting
The Berlin rental market is experiencing high demand due to a combination of factors, including population growth and a reduction in supply caused by a lack of new-build construction starts and a lack of affordable housing. The sector therefore is experiencing substantial increases in rental values. For example, the median rental price for new lettings in the city as a whole in 2023 was 13.60 €/sq m/month, which was an increase of 18.3% on the previous year (Berlin Hyp and CBRE, 2024, p. 10). In Mitte, the median rental price was 18 €/sq m/month, an increase of 18.5% (Berlin Hyp and CBRE, 2024, p. 10). On this basis, the client should consider letting the apartments in the future, as they provide a significant investment opportunity.
Berlin Commercial Market - Retail
There was a 9% increase in retail lettings in Berlin in 2023 compared to activity in 2022 (JLL, 2024a). The prime retail yield in the city in H2 2023 was 3.4%. The area around Alexanderplatz, which is a significant tourism and retail hotspot and is within a short distance of our site, attracted a rental of 170 EUR/sq m/month on average in 2023 (JLL, 2024a).
MOOR CONSTRUCTS
Moor Construction is a Building and Civil Engineering Construction Company based in Sheffield, United Kingdom that specializes in Building, Civil Engineering and project management.
CONTACT INFO
City CamCity Campus, Howard Street, Sheffield, S1 1WB, UK
Phone +44 (0)114 225 5555
OUR SERVICES
Building Construction
Civil Engineering Works
Property Development / Real Estate
Specialized Construction Services
Development Consultancy
Project Management Services
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