If It’s A Property Investment With Start-Up Bite – Berlin Is The Place To Be

04.10.16

As Britain ponders life outside the European Union, one city is poised to capitalise in the event of a Brexit: Berlin. Time is a healer and nowhere is this more true than in Germany’s scrubbed-up capital Berlin. A city of paradoxes from its Prussian opulence and underground techno scene to its hardcore Stalinist suburbs, the city’s capacity for reinvention puts even Queen of Pop Madonna’s talents in the shade; economic strength, rising household figures and smart city planning, continuing to push the German Mecca to the fore as one of Europe’s prime locations for property investment.

2015 set an impressive benchmark for real estate market performance. Along with Paris, the city was second only to London as Europe’s most active property market, with transactions of more than EUR10 billion taking place. In fact, one in five Euros invested in German residential real estate is currently spent in Berlin.

Average apartment prices are also building nicely, up 18.5% this past year, with average rents across all market segments up 5.1% in the same period, driven by a strong employment market, a growing population and a supply deficit. In fact, people are arriving in the city faster than houses can be built. Around 12,000 new housing units are under way this year, with forecasts predicting housing demand to reach 15,000 to 20,000 new units. No other major European country capital is currently delivering such affordable housing costs either, with the average 2-bed condominium costing Euro 210 000 and average new build 2-bed condominium priced at Euro 390 000.

But the city is upping the competitive ante in other ways too. Berlin’s senate has written to hundreds of business headquartered in London this past week to persuade them to switch their operations overseas, as well as making plans for a bureau in the UK capital designed to poach business from the local start up community, expected to open in September.

The senate is also warning London-based venture capital funds that unless they relocate their headquarters, they stand to lose out on money from the European Investment Fund (EIF) once Britain formally leaves the EU. Last year, the UK benefited to the tune of £559m from EIF coffers.
“We want to make sure that British startups and international talent feel welcome here,” says Cornelia Yzer, Berlin’s senator for the economy, technology and development. “Brits already love Berlin – we see that from the number of people who travel here every weekend. We will continue to receive them with open arms.”

With Berlin’s startup scene already having overtaken London’s in terms of venture capital investment in 2014, policymakers in the German capital feel emboldened. They argue that their city offers a pool of talented international developers who may avoid Britain once curbs on migration are applied, commercial (not to mention residential) rents that are a fraction of those in London, and – not unimportant for a young, creative industry – a better party scene.
With Germany having a strong network of large manufacturers, as well as research bodies such as the Fraunhofer and Max Planck Institutes, Berlin already has an edge over London when it comes to startups that specialise in business-to-business services. And while London remains Europe’s capital of ‘fintech’ – or financial services technology - many companies will be nervously watching to see whether the UK can retain its “passporting” privileges, which allow a bank to operate in all European countries so long as it has a licence from an EU member state.
One could argue that the best founders and entrepreneurs build successful companies no matter the macroeconomic or political climate, and that the best of the UK will continue to succeed even in a Brexit-consumed world. Are we truly willing to take that chance?

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