Has Berlin, the nonpareil of the European real estate market for several years, lost any of its allure? “Berlin has been doing well, but will it be double-digit growth for the next few years?” Most Emerging Trends Europe interviewees remain fans. “Berlin is still the star and the shining light and the city everybody wants to be in. I tell people, ‘if you look at the last transaction that was done in Berlin, and you try to price the next transaction at that level, you’ll lose.’ You need to think ahead two years to where the market will be. It still has a lot of room to run,” argues a financier. The consensus is that the German capital is still a good bet in both the short and long run. In the immediate future “rocketing” rental growth is expected to continue in an of ce market where vacancy stood at a miniscule 1.4 percent in the middle of 2019, and where as much as 900,000 square metres of take-up is expected over the course of the year. Residential rents have also soared, and the municipal government’s introduction of a draft law to cap the amount tenants pay for five years represents a rare cloud on the horizon.
“Listed residential companies with exposure to Berlin have seen their share prices fall,” says a German investor, who warns that the measure will be counterproductive “because investors will shy away from the market and will not build, or invest into, new residential buildings”. A number of interviewees believe that ultimately Berlin will emerge as the hitherto multipolar country’s pre-eminentcity. “It is still in the process of making a quantum leap to a different role within Germany. It is no longer only the political centre of the country, but it is becoming more of an economic player,” says one. “Berlin is developing into the peer of London and Paris,” adds another. Prices have risen rapidly to match or exceed those in other German cities, so investors may have to become savvier. “It’s the cyclically most advanced market in Europe, probably not far off where the US is, and so it warrants much more careful examination. That doesn’t mean you can’t make some money along the way. It just means you have got to be more selective and not just spray your capital around there,” advises an international investor. (Content from PWC emerging trends in real estate Europe 2020)