I am old enough to have a personal memory of this monumental entry to Unter den Linden being dramatically cut off by The Wall, so it was very gratifying to see one of the best-known landmarks of Germany again serving as a bridge between the eastern and the western sides of the city. Our cycling tour took us to the former wasteland of Potsdamer Platz, which is now a bustling square famous in real estate circles for the adjoining Sony Center - one of the biggest shopping centres in Europe and on the wish list of many a global investor from New York to Seoul.

We also saw plenty of cranes around Museum Island in Mitte Berlin where the Pergamon Museum is being renovated and the nearby City Palace is being rebuilt as the Humboldt Forum. And throughout the city there were plenty of new residential blocks arising on the many empty plots of land that remain a stark reminder of Berlin’s history as a divided city.

No CBD in Berlin
One thing I did not see were office towers signalling the presence of a central business district. Indeed, according to Andy Watson, former CIO of LaSalle Investment Management and author of ‘A Thousand Days in Berlin: Tales of Property Pioneering’, Berlin does not really have a CBD. Why should it? Not a single DAX-listed company is headquartered in the German capital. The city's TMT community may be burgeoning, but most start-ups are gravitating towards the vacated industrial buildings in the Kreuzberg and NeuKölln districts which are far cheaper than any of the – relatively limited – prime office locations.

That fact alone would appear to strike Berlin off any list of European contenders seeking to grab some of the financial services workers from the City of London in the wake of the UK's vote for Brexit. Twenty seven years after Germany's reunification, Berlin still has other priorities than building a shiny office hub in the centre of the town. Another disqualifier is that its office vacancy level is just 3%.

In other words, Berlin lacks the real estate necessary to accommodate the widely touted exodus of financial services workers from London. It is not the only one, as Peter Leyburn, EMEA Director of client services at Colliers International, pointed out during an enlightening session at the Inrev conference. In fact, he claims there is more smoke than fire surrounding media reports that London is set to lose its status as a major financial services centre due to Brexit.

Dublin and Frankfurt edge ahead
Commentators have said that London could lose up to 100,000 jobs or more, but no single EU city would be able to accommodate so many new workers, Leyburn said during a session entitled Breaking away: Assessing the impacts of Brexit on real estate. 'These jobs would need to be dispersed across nine different cities,' he noted. 'This could generate huge real estate cost savings, but this re-allocation of jobs would absorb the entire talent pool of workers with FBS (financial broker services ed,) skills of these cities.'

At this point, Dublin and Frankfurt appear to be the greatest potential beneficiaries of any withdrawal from the city of London. Some banks are opening a 'second home' in these cities as well as Paris while CEE is also gaining traction for outsourcing services, Leyburn said. He pointed out, however, that a downsizing trend was already becoming visible in the banking sector even before Brexit.

There were several other reality checks during the two-day conference which covered a vast array of topics to help investors and fund managers navigate these uncertain times and manage political risk and technological upheaval. In that context, José Luis Pellicer, partner and head of research at Rockspring PIM, put up a turbo-charged defence explaining why real estate is not experiencing an asset price bubble, despite the fact that yields for core properties in prime locations are trending towards levels below the previous boom period in 2006-07.

Real estate credit is not growing and supply in terms of net additions in percentage terms is not increasing either, Pellicer argued. Another key point is that Europe is not in recession. 'On the contrary, we're seeing the beginning of economic expansion.'

No licence to throw caution to the winds
Megan Walters, international director and head of research for Asia-Pacific at JLL, put it this way. 'The fundamentals are pretty strong and things look pretty favourable...It's not that the property yield is wrong, it's the bond yield that is.'

That is not a licence to throw caution to the winds, however, as Judy McMahon, portfolio manager real Assets at US investor UPS Investments, noted in a session on global investor insights across the continents. 'There's less runway before us than behind us now. It's time to be careful,' she warned.

Political leaders and governments come and go, but good advice remains a constant.

Judi Seebus
Editor in Chief PropertyEU

PS: ‘A Thousand Days in Berlin: Tales of Property Pioneering’ by Andy Watson is essential reading for real estate professionals interested in the evolution of the Berlin market. Yours truly has been described as the Spiritual Godmother of this book, which was sponsored by Rockspring PIM.