London tops Allianz’s 2021 European office market ranking

London, Stockholm and Berlin have been ranked Europe’s top three cities in terms of office sector investment opportunities in Allianz Real Estate’s Cities That Work 2021 report.

The study examines 26 top-tier cities in Europe and incorporates 20 proprietary and external indicators which are used to generate structural scores for each city.

‘While the world has radically changed since our last report in 2019, it is clear that offices remain vital to the European workforce; fostering collaboration, innovation and maintaining corporate culture,’ said Megan Walters, global head of Research at Allianz Real Estate. ‘Investment opportunities remain in commercial real estate, given the extended elevated spread to real risk-free rates; this will support investor demand alongside occupier demand for major, multicultural  cities such as Stockholm and Berlin and London – truly international hubs with strong structural scores, underpinning our commitment to the region.’

London comes out significantly ahead in the rankings, despite the impact of both Brexit and Covid-19. With excellent scores in each category, it ranks first for both global city status and human capital and is also set to disproportionally benefit from the rise of the tech sector and the predicted falls in prime core office vacancy rates.

Stockholm earns a second overall ranking through top scores in the office market balance, economic strength, human capital, technology & connectivity, and ESG categories. Stockholm’s biggest strength is its office market balance, rated first. Low volatility has resulted in significantly above average risk-adjusted returns over the last 15 years. It also has the second-highest rental growth.

Berlin is the highest-ranked German city, rated above Munich and Frankfurt for the first time by Allianz Real Estate. The most globally connected city in Germany with a rich history and world-class cultural offerings, Berlin has used its open values and accessibility to attract international talent and cultivate a growing tech sector – ranking third for market balance, technology & connectivity, and global city status.

Denmark’s capital, Copenhagen, is named as one of the top cities to watch. With the fifth-highest forecast GDP growth, driven by its service and export-oriented economy, its economic strength is also supported by population growth: the city is one of only three scored with expected population growth above 1% a year. The city also has strong service sector growth and a top six ESG ranking.

Megan Walters commented: ‘With Covid-19 dramatically changing the way people work and accelerating structural trends, significant methodology changes were made from the 2019 and most recent report to reflect a new environment. Growing internal and external ESG awareness is represented in the new ESG category, and technology and connectivity criteria are more sophisticated and carry a heavier weighting.’

The full Cities That Work 2021 report can be found here.


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