Real estate developers in the Berlin-Potsdam metropolitan region are benefiting from high demand for residential and commercial properties in the area.
The total volume of completed, under-construction and planned projects was almost seven million square metres in the period under review (2010 to 2017). This marks a 12.9 per cent increase on last year’s figures and shows that the growth trend in the metropolitan region is continuing unabated. Significant increases were also seen in the monetary volume (EUR22.4m) and in the number of projects (993) compared to the previous year.
These are the findings of the study “The Real Estate Market in the Berlin-Potsdam Metropolitan Region”, conducted on behalf of HOCHTIEF Projektentwicklung. The independent analytical firm bulwiengesa AG evaluated projects with 1,000 square metres or more of rental/floor or residential space that are being carried out by developers in the Berlin-Potsdam metropolitan region. The 2013 report was the seventh such study conducted by bulwiengesa. The figures for 2013 include developments completed since the beginning of 2010, as well as those under construction or at the planning stage on 1 July 2013 that are due to be completed by the end of 2017.
With a more than 10 per cent increase in overall floor space volume, Brandenburg’s capital Potsdam is currently enjoying dynamic growth similar to that seen in Berlin. However, Berlin continues to be the region’s driving force in the project development market, with its share of the total floor space volume remaining constant at 92 per cent. This is also true for the transaction volume of EUR7.3bn achieved in 2012, which set a new record for Berlin. In addition to this, the residential segment reported a transaction volume of EUR3.1bn, significantly closing in on the level of commercial revenue.
The residential sector is the main growth engine for project development business in the metropolitan region. Totalling 4.35 million square metres (+24 per cent), new construction in this segment accounts for 62 per cent of all projects. In second place are office projects with a total volume of 1.15 million square meters, an increase of 14 per cent compared to last year. This is the first time that this area has improved since the initial study in 2007. Volume in the remaining segments was down in 2013 over the previous year: retail real estate shrank by six per cent again, to 584,000 square meters, bringing its volume to a record low. The decline in hotel developments was even more pronounced – a 22 per cent drop to a meagre 547,000 square meters.
In the entire metropolitan region, 1.6 million square meters of residential developments were at the planning stage as of mid-2013, a 45 per cent increase compared to the previous year’s analysis. With a share of 57 per cent, residential developments accounted, for the first time, for more than half of the monetary value of all projects covered by the study.
“The residential market in Berlin and Potsdam is primarily fuelled by local developers who are realising increasingly large projects because of the increased demand,” says Gordon Gorski, head of HOCHTIEF Projektentwicklung’s Berlin-Brandenburg branch. “The circumstances are particularly favourable as a result of continuing high demand and good financing opportunities.”
This residential supply has been met with steady high demand, which has also had an impact on the development of rents and purchase prices. Top rents (the average price level in the premium segment that makes up three to five per cent of the market) in Berlin’s residential properties have risen continuously since 2005. At the end of 2012, top rents were EUR15.30 per square metre in Berlin, around nine per cent higher than at the end of 2011. Top rents in Potsdam remained unchanged at EUR12 per square metre during the same period.
New highs were reached by the top prices fetched by newly constructed condominiums: EUR5,500 per square metre in Berlin and EUR4,050 per square metre in Potsdam.
“Compared to other popular German cities and especially to large cities in other countries, purchase prices here are still at a moderate level,” says Andreas Schulten, a board member of bulwiengesa.
In Potsdam, people have to pay an average of 6.7 times their annual salary to buy a condominium, while in Berlin the average is 8.3 times their annual salary. Both of these figures were significantly lower than those in top-tier cities such as Munich (11.1) and Frankfurt am Main (9.7). This price differential is also reinforced by the relatively low level of average annual salaries in Berlin.
In the future, the average size of residential units in the German capital will decline, and projects will increasingly focus on other types of locations. Newly planned developments are already, on average, several square meters smaller than they were a few years ago. Residential projects are now also increasingly found on major thoroughfares; not too long ago, there was no demand for housing in such locations. Similar trends have already been identified in cities such as Munich and Frankfurt am Main.