Frankfurt real estate market booming as Brexit looms – Financial Times

On the eve of Brexit, the commercial real estate market in Germany’s financial capital Frankfurt is booming like never before.

In 2018, the value of transactions in the city increased by 36 per cent to an all-time record of €10.4bn, turning Frankfurt into Germany’s hottest market for commercial real estate ahead of Berlin and Munich, according to new data by BNP Paribas Real Estate.

The surge is driven by a flurry of chunky deals involving large office towers, with two-thirds of the deals involving transactions of €100m or more.

“Big, professional investors are banking on a positive performance of [Frankfurt’s] office market,” said José Martínez, managing director of BNP Paribas Real Estate, adding that the expectation that Frankfurt will benefit from Brexit was one contributing factor.

As many as 25 UK-based banks have chosen to move operations and staff from London to Frankfurt, a survey by state-owned Frankfurt-based lender Helaba showed in September. Among the lenders are Goldman Sachs, Citi, JPMorgan and Barclays.

The Helaba study predicted that by next year, the number of staff employed by foreign banks will rise by 2,000 to around 4,500. Longer term, this number was forecast to increase to around 8,000.

While the total number of jobs to be relocated will be initially limited, financial marketing group Frankfurt Main Finance has estimated that the total assets held by domestic and international banks in in the city will rise by more than a fifth as €750- €800bn in assets are shifted across.

Rising real estate prices – factoring in anticipated increases in rents and asset values – are weighing on the returns, though. In the final quarter of 2018, the average yield for office space in Frankfurt fell to 2.95 per cent – sitting below 3 per cent for the first time.

BNP Paribas said it expected transaction activity to cool down this year as the volume of real estate on the market is limited. Mr Martinez predicted that the value of overall transactions would be at least equal to the five-year average of around €7bn.

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