Real-estate market

London's Loss is Frankfurt's Gain

The purchase of Cannon Place, a huge office development in central London, has fallen through.
  • Why it matters

    Why it matters

    Frankfurt is experiencing a house-price rise that may be unsustainable and could price new buyers out of the market.

  • Facts


    • Between June 2015 and May 2016, rents in Frankfurt climbed 8 percent, apartment prices by 23.5 percent and buildings by 15 percent.
    • Almost 9 percent of Frankfurt office space is currently empty.
    • Following the June 23 Brexit vote, many predict that London’s real-estate market will cool.
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Ralf Werner has just signed off on deals for a number of penthouse flats in downtown Frankfurt for price tags ranging from €700,000 ($763,000) to €1.8 million.

“One day after the Brexit vote we had London bankers reserving four of our last six flats,” he said, referring to a luxury accommodation block within easy walking distance of the skyscrapers that house the city’s top banks.

Mr. Werner doesn’t know if the British bankers who are buying Frankfurt flats plan to move to the German city themselves – or if they want to rent them out.

Britain’s resounding “no” to the European Union last month has turned out to be a loud “yes” to the German real estate market.

In particular, estate agents and building owners in Frankfurt are gearing up for an inflow of money from Britain as they expect jobs to be transferred from the British capital to Germany’s banking hub.

There is a real-estate boom already underway in Frankfurt. Even before the British referendum, an index developed for Frankfurt by analysts at Empirica warned of a “high risk of a bubble.”

“The mood of the market in inner-city office space has become far more gloomy.”

Eduardo Gorab, Analyst, Capital Economics

According to IMX, a real estate price index of the German online real estate website Immobilienscout24, average rental prices offered between June 2015 and May 2016 climbed by 8 percent. Prices for existing flats shot up by 23.5 percent while new buildings became 15 percent more expensive.

If Mr. Werner’s prediction that “several thousand” Brits will relocate to Frankfurt materializes, it will ignite both rental and property prices, even if the impact is not felt overnight.

The new arrivals “will come gradually over the next few years, not all of a sudden,” said Daniel Ritter, managing director of the Von Poll real estate firm, adding that he expects moderate price rises in the region.

Frankfurt gain may be London’s loss. The British capital is on edge as it waits to see whether bankers and other companies will pack up and move to other E.U. capitals. Along with Frankfurt, possible destinations include Dublin, Paris, Amsterdam and Luxembourg.

07 p26 At Historic Lows-01


On its face, it’s business as usual on London’s many building sites, where digging, drilling and building continues unabated despite the surprise outcome of the June 23 ballot. But behind the scenes, the real estate sector is fretting.

Almost daily the British press reports on another case of a bank, investment fund or industrial company which may up and leave the country. Meanwhile, several large financial firms froze their real-estate funds in recent days – sending a shudder throughout the entire sector, not least because such funds tend to invest in safer options, such as commercial buildings in top locations.

“The mood of the market in inner-city office space has become far more gloomy,” said analyst Eduardo Gorab, who works at the consultancy Capital Economics.

The first deals have already gone belly up, sources in London say. Those include “Cannon Place,” an office complex measuring some 389,000 square meters, where the sale contract was on the brink of being signed when the buyer suddenly pulled out.

Similarly, German real estate funds, which are invested in Britain to the tune of around €8 billion, are moving with caution. Union Investment Real Estate, for example, already pulled out of a London deal amid jitters ahead of the British ballot on June 23.

The tentative mood was already obvious in the first half of the year, as doubts circled about the outcome of the vote, denting the volume of transactions to £22 billion ($28.5 billion; €25.8 billion) from a previous £35 billion. Experts agree that this skeptisicm will continue to weigh on London prices. Christian Ulbrich, German head of the worldwide real estate company JLL, expects that good property in the capital will shed 5-10 percent of its value in the short term.

And Marcus Lemli, European head of the British real estate firm Savills, said the only people who are buying at the moment are those trying to snap up a bargain.

Foreign investors in particular are hunting cheap options, given the pound’s fall versus the euro or the dollar. Exchange rates could reduce the price of London property by as much as a fifth for people paying in dollars, said Mr. Ulbrich.

He and other experts expect the market to take a short-term hit, but stabilize in the longer term.

But European competition wants to make the most of the short-term wobble in the London office-space real-estate market.

And in Frankfurt, agents are keen to lure new companies to fill the 8.8 percent of office space in the city that is still empty. This figure is the highest in Germany, and would be even higher if many offices hadn’t been converted into living space.

But while there is lots of office space to be had, some Frankfurt residents are bracing themselves for spiralling sale and rental prices. Fears are greatest among those who are moving away to work in another city for a few years, but then hope to return.

“I can imagine myself returning to Frankfurt in a few years and don’t want to face a flat hunt in an overheated market,” said a young investment banker who was moving to another German city to work at a DAX-listed firm. To keep all options open, she decided to sublet her current two-room apartment, which costs €750 per month, to ensure she can get a foothold in the city again.


Peter Köhler is a Handelsblatt editor in Frankfurt, reporting on banks, private equity firms, venture capital and corporate funding. Robert Landgraf is Handelsblatt’s chief correspondent for the financial markets. Kerstin Leitel covers banks and insurance companies. Reiner Reichel specialises in real estate, closed-end funds and system models. To contact the authors:,,

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