INVESTING IN GERMANY

Changing course

High-tech clusters make Mannheim a good choice for lifescience businesses

Germany has long been famed for being one of Europe’s most predictable investment markets. But as 2022 revs up, this core territory may yet reserve some surprises. Isobel Lee reports.

If 2021 will be remembered for the exit of Angela Merkel and a difficult winter marked by recession risks and pandemic problems in Germany, 2022 is likely to usher in more positive headlines. While, like its neighbours, German capital markets revealed the weaknesses of some retail and office segments in the last two years, other asset classes have proved in rude health.

“We see opportunities for investors in forward deals, particularly in the areas of multi-family homes, nursing homes and senior living and in offices in prime locations,” Jan Linsin, head of research at CBRE Germany, says.

“Opportunities are also offered by investments in the operational real estate sector and increasingly also in life-science real estate and infrastructure.” Meanwhile, if the territory’s logistics successes reflect a secular trend sweeping the globe, Germany’s residential markets have arguably powered into a class of their own. The year 2021 closed with Vonovia and Deutsche Wohnen’s ‘will they, won’t they’ storyline concluding after Vonovia secured 88% of the share capital and voting rights in Deutsche Wohnen to create the largest housing group in Europe, with a total property value of almost €90bn. Vonovia’s CEO Rolf Buch says: “The merger with Deutsche Wohnen is opening up new opportunities for us. We will use our renewed strength to take on even greater responsibilities on the social front as well.” Yet even the asset classes which investors avoided last year are starting to represent interesting pockets of value. The sale by Patrizia at the end of 2021 of a 50-property strong German grocery retail portfolio met with “unprecedented interest” before being purchased by Germany’s GPEP for a price understood to be around €325 mln, reflecting a record net initial yield of around 4%. “We remain fully convinced of the resilience of food anchored convenient retail in the country and will continue to be active in this property type,” says Mahdi Mokrane, head of investment strategy & research at Patrizia

Germany’s potential has often resided in its regional powerhouses, and 2022 seems likely to shift up a gear. The city of Hamburg’s extensive port and river areas are set for further development, through the regeneration project HafenCity, according to investor relations chief Christina Ruppert. “Together the three urban development areas by the rivers Elbe and Bille — HafenCity, Grasbrook and Billebogen — represent a transformation zone of over 300 hectares in size,” she says. “With homes for some 25,000 people and space for around 70,000 jobs it is a development opportunity whose character is second to none in Europe, if not beyond. The Science City urban development project simultaneously opens up further future perspectives for Hamburg as a city of knowledge and science.” While 2021 brought its challenges, on the whole, its crises also prompted positive action, Ruppert says. “HafenCity’s vision has changed as a result of the coronavirus pandemic to the extent that it now demands even higher

standards of resource-efficient and climate-neutral urban development. A mixed-use, densified district like HafenCity must meet the qualities and standards of sustainability, environmental sustainability and social equity if it is to be both liveable and resilient.” She adds: “This can be achieved with well-designed green spaces and open spaces, inclusive and collaborative forms of housing, and innovative, sustainable office buildings that flexibly adapt to the need for hybrid and mobile working.” The outlook is also bright in Mannheim, where, according to Christiane Ram, director of the city’s office of economic development, “companies find a wide range of investment and settlement opportunities. The business location offers the best infrastructural framework conditions, as well as innovative networks”. Current development projects include the Mannheim Medical Technology (MMT) Campus, situated within walking distance of the University Hospital, which features office, workshop, laboratory and cleanroom space, as well as residential and commercial units resulting from the conversion of the Alte Brauerei. As a hotspot for digitisation and smart production, the city of Mannheim is also using the European Green Deal as an opportunity to reshape its sustainability policy. With the Green Tech Innovation Center, a supra-regional project of the Rhine-Neckar metropolitan

region will emerge under the lead of the Mannheim Office of Economic Development, which is set to create a physical space for green technologies in the Glückstein Quarter by the end of 2025. Meanwhile Berlin, also no stranger to innovation, will be throwing down the gauntlet to other European capitals with a raft of dynamic regeneration programmes. According to the Berlin Senate Department for Urban Development, Building and Housing, the government plans to building 200,000 new homes over the next 10 years to alleviate pressure on current supply-demand dynamics. While the city state already comprises 40% parkland and water, significant green spaces will also feature in future plans, facilitated by new railway lines and road and cycle networks, as well as climate-friendly construction and innovative rainwater management in new and existing districts.

The State of Berlin has moreover commissioned Tegel Projekt to transform the former Airport Berlin Tegel into a green and innovative mixed-use district characterised by two major developments. Berlin TXL — the Urban Tech Republic, a research and industrial park for urban technologies, and Schumacher Quartier, a new residential district slated for completion in 2027 will take shape on the 500 ha site. More homes will follow in the neighbourhoods Cité Pasteur and TXL Nord, while Grün Berlin is landscaping some 200 ha of parkland. “Berlin TXL will focus on what keeps the 21st century’s growing, major cities alive: the efficient use of energy, sustainable construction, eco-friendly mobility, recycling, networked control of systems, clean water, and the use of new materials,” Projekt Tegel CEO Philipp Bouteiller says. The technological park will focus on urban use cases, to benefit not only the city, but the world, Bouteiller adds. Meanwhile, the whole project’s ground-breaking approach to sustainability will also make other cities sit up and look. “The scheme will include more than 5,000 homes, predominantly made from wood, making it the largest all-timber urban area in the world. From pioneering technology around water and energy use, to our biodiversity pledge, we consider this publicly-funded project to be ‘open-source’, so we’re happy to share our findings with the world,” he says.

“We see opportunities for investors in forward deals, particularly in the areas of multifamily homes, nursing homes and senior living and in offices in prime locations.”

Jan Linsin

CONFERENCES & EVENTS AT MIPIM 2022

INVESTING IN GERMANY

THURSDAY, MARCH 17, 15.45 - 16.30 – Agora Room

GERMANY – A NEW REAL ESTATE ERA?

Is Germany still the powerhouse of Europe’s economy? What market stresses may emerge after the departure of Merkel? Can investors still find good value in Germany, and if so, what asset classes and regions should they focus on?

A new neighbourhood is taking shape at Waterkant in Berlin Spandau