02/08/2013 | by
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Investors view cities in Germany as having the best commercial real estate prospects in Europe, according to a report.

The report on emerging trends in Europe from the Urban Land Institute and accounting firm PricewaterhouseCoopers ranked major cities based on a survey of international real estate professionals. Munich topped the list, followed by Berlin in second place. Hamburg was ranked fifth. 

The three German cities share a strong local microeconomic climate and “resilient” property markets, according to Joe Montgomery, chief executive of ULI Europe. The report noted that Munich offers a liquid real estate market and can withstand economic turbulence; Berlin enjoys a growing reputation as a technology hub and cultural center; and Hamburg, the second largest city in Germany, benefits from a diverse mix of businesses.

Montgomery said the survey indicates that investors continue to favor locations typically considered safe havens. Respondents ranked London third and Istanbul fourth.

“Almost five years since the start of the financial crisis, real estate investors remain cautious about capital deployment and the availability of debt,” Montgomery said. “As a result, investors are focusing on harder to find opportunities in blue-chip cities such as Munich, Berlin, London and Paris, rather than turning to secondary locations in search of higher returns.”

Investors still see London as Europe’s ultimate fortress market, according to the report, thanks to the size and liquidity of the real estate market. Respondents also noted that they consider London removed from the rest of Europe’s ongoing economic issues. Meanwhile, Istanbul’s potential is attracting investors, according to the report. 

Additionally, the cities that ranked the highest among investors were all in Western Europe. The report noted that these cities offered international appeal and better economic prospects. The cities least favored by survey respondents included those most affected by Europe’s economic turbulence, such as Athens, Lisbon, Dublin, Madrid and Barcelona. 

Simon Hardwick, real estate partner at PwC, said investors appear optimistic about the prospects of the European commercial real estate market for the first time in many years. 

“Our report shows that real estate investors are approaching opportunities with a new mindset, conscious that he environment in which they are operating is ‘the new normal’ and is set to stay the same for some time yet,” he said.