February 16, 2022 | The German real estate investment market is booming, and Berlin is leading the positive trend. The capital's thriving corporate landscape is likely to ensure strong demand for commercial real estate and residential space in the future as well.
Last year, more properties changed hands across Germany than ever before. The transaction volume was more than 115 billion euros, according to a survey by Engel & Völkers Commercial Berlin. The residential property asset class played a decisive role in this - with transactions worth a record 51 billion euros. The commercial investment market achieved its second highest value in ten years with over 64 billion euros.
In the residential segment, two megadeals contributed strongly to the boom in 2021: the acquisition of Deutsche Wohnen by Vonovia, and the purchase of a five-digit number of apartments by Heimstaden. These major transactions benefited the Berlin market in particular, which also achieved a record transaction volume of around €40 billion. The capital's commercial real estate market in particular is experiencing a strong upswing: At 10.6 billion euros, the transaction volume is 25 percent up on the previous year and the second highest in history. Office properties are by far the most sought-after asset class here, with a share of around 70 percent. Office take-up in Berlin rose by 18 percent to around 840,000 square meters. A disproportionately high share of this was attributable to the fourth quarter.
"In 2021, large-volume transactions in particular dominated market activity," explains Ali Asefoglu, Head of Investment at Engel & Völkers Commercial in Berlin. "In Berlin alone, for example, 27 large transactions were realized with an investment volume of 6.2 billion euros. This alone corresponds to over 63 percent of Berlin's total commercial turnover."
There are good reasons why Berlin is so sought-after by international real estate investors. "The capital has a corporate landscape that is unique in Europe, with a focus on information technology and e-commerce," says Asefoglu. Some former Berlin startups have grown tremendously, most notably Zalando and HelloFresh, which moved up to Germany's blue-chip index when the DAX was reorganized last year. And the scene continues to grow: Berlin companies have raised more than 13 billion euros in venture capital in the past three years - the lion's share of the German total at 60 percent.
Companies are investing this capital in their further growth - especially in highly qualified personnel, which they recruit throughout Europe. This supports the Berlin real estate market, because the many new employees need office and residential space. The city and its companies benefit from each other: Berlin has been attracting young academics and creative professionals since reunification - a decisive advantage in recruiting and an important factor in companies' decisions on where to locate. The economic success of the companies is now itself becoming a location factor and making the city even more attractive. The influx from abroad is likely to accelerate even further because, similar to the economic crisis of 2008, the Corona pandemic is now depriving many highly qualified workers in Southern Europe of development opportunities in their own country, so that they are putting out feelers to Berlin.
According to recent surveys, the overwhelming majority of international investors continue to regard the German real estate market as attractive, with just under half even considering it very attractive. The influx of capital is therefore likely to continue and ensure further strong transaction volumes - especially in the Berlin market, which is already by far the largest among the top seven German cities. Engel & Völkers Commercial Berlin expects a volume of between nine and ten billion euros in 2022. "That would be another top-three year for the capital," says Asefoglu. "We are convinced that Berlin is in for the golden twenties of the 21st century."
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