With the German real estate market continuing to be dominated by domestic players, Munich offers a good case study of the country as a whole for international investors looking to get a foothold into ‘the safe haven of Europe’. Just as there is not a single city in Germany that dominates, unlike Paris in France or London in the UK, there is no Central Business District (CBD) in Munich. The reasons for this are historic as retail, business and residential properties are scattered throughout the city. This is a great opportunity as there are different hubs that may appeal to different companies.

Nevertheless, the more central the location, the more desirable it is. Prices and rents for top offices continue to rise in Munich, despite the Covid-19 pandemic, similar to other leading German cities. The prime rent in the Bavarian capital rose by 1.4 per cent in Q4 2020 compared to the third quarter of the year and now stands at €37.50/sq m. Prime office yields remain at 2.7 per cent for such properties and due to the high demand for core products, they are expected to remain stable this year or even fall.

A further characteristic of Germany as a whole and Munich specifically is the mix of businesses. With the likes of Allianz and BMW, the third largest German city boasts more DAX-stock exchange listed companies (six) than any other German city. At the same time, it is also home to some of the biggest international players in the world with Amazon leasing 13,300 sq m new office space in the sub-market Parkstadt Schwabing in September 2020, an area which is also home to other tech giants such as Microsoft, IBM and Osram. Furthermore, the city has a number of government institutions and almost 200 small and medium-sized businesses, the backbone of the German economy. Only Duesseldorf is ahead in Germany when it comes to the amount of private equity investment.

A well-educated future workforce, with two of the six leading German universities based in Munich, completes the set with the ‘Erhaltungssatzungen’ (conservation statutes) ensuring that investors and developers need to follow local legislation when it comes to providing social housing and limiting rent increases to ensure rent prices don’t become unaffordable for employees.

For all these reasons, partnering with a local developer, investment partner or agent who is able to navigate the local landscape is an increasingly attractive avenue for international investors and tenants to beat the local competition and secure the best assets in Munich specifically, and Germany as a whole.

Further information

Contact Savills Investment
Contact Macrel Wolter