![Magdeburg in Saxony-Anhalt Magdeburg in Saxony-Anhalt](https://www.refire-online.com/downloads/3123/download/magdeburg%20saxony-anhalt.jpg?cb=977a7a5c8611e1f9217587a453c63e49&w={width}&h={height})
Magdeburg in Saxony-Anhalt
Cities in Germany's eastern states have been showing steady growth in both the size of their economies and their investable real estate markets in recent years. Announcements of large scale industrial inward direct investment by global chipmakers and suppliers to the electric vehicle industry have helped fan the flames of interest in unearthing new opportunities in real estate that could profit disproportionally from these future industrial hotspots, so-called Hidden Champions.
A recent online discussion, titled "Hidden Champions in the East - Rising Stars in the Real Estate Market", in which REFIRE participated, dealt with the expansion plans of some of these large companies, whose investments are expected to keep office and logistics rents in the region stable at least, and possible even rising.
Steffen Sauer, managing director at broker Colliers in Leipzig and Dresden in Saxony, the two largest cities in the east, said that property markets in the region were holding up robustly, partly due to the fact that the markets are less dependent on large leases and that small and medium-sized requests for space can still be fulfilled in available existing properties.
"The market in eastern Germany currently offers good opportunities for commercial tenants and investors in all sectors in part due to the fact that pricing here, following the purchase price declines last year, is more advanced than in Germany's A-locations... Even beyond Leipzig and Dresden, demand for land for office and logistics projects among investors and owner-occupiers in eastern Germany remains high. Planned relocations and expansions by major companies such as Intel, Beiersdorf and Deutsche Aircraft continue to provide a tailwind for the east, so we expect rising take-up of space in the second half of 2023 as well."
Karsten Kluge, managing director of Berlin-based DVI Group, which holds portfolios of residential and office properties, highlighted the merits of office investment in Chemnitz and Erfurt. In both cities, DVI has a portfolio of more than 170,000 sqm and looking to expand further. "The combination of a growing population, a prospering local economy and low levels of new construction provide us with ideal conditions for our acquisitions in Erfurt and Chemnitz. Both cities will continue to develop positively. Chemnitz with its robust medium-sized economy and high-tech companies in the vicinity of the Technical University. Erfurt as the state capital (of Thuringia), new ICE hub and its logistics location in the center of Germany."
While the faltering economy and high energy prices could put a damper on the upward rise of rents, Erfurt and Chemnitz could benefit from the lack of office space meeting the new higher energy efficiency standards. Top rents are likely to hold firm at about €13.00 per sqm. This year, Erfurt will see the opening of DVI Group's new centre downtown, the Forum am Anger, a mix of office, retail, gastronomy and entertainment areas - following conversion by general contractor Goldbeck.
George Salden, CEO of Berlin-headquartered Capital Bay Group, focused on the charms and attractiveness of Magdeburg, the capital of Saxony-Anhalt. His company is building the Klinkeviertel neighbourhood development in the popular Sudenburg district, a mixed-use residential quarter with 500 apartments and a total living space of around 36,000 square meters. Various forms of living - from co-living for younger people to inpatient care - as well as commercial uses will offer a diverse range of options for all age groups. 40% of the living space is earmarked for assisted living and inpatien care, with heat being generated using new technology from decentralized air-source heat pumps, "setting standards from an ESG perspective", said Salden.
The Klinkeviertel is one of the first projects Capital Bay is undertaking with its joint venture partner Daiwa House Modular Europe, the market leader in modular construction. Salden sees demand for housing growing in the city - "With large companies such as Intel, Hello Fresh and Nokera settling in and around Magdeburg, demand in the city's housing market will also increase and further diversify in the medium term.
And pitching in on behalf of East Brandenburg and the border city of Frankfurt (Oder) was Peter Bergmann, project manager of ALCARO Invest, a nationwide specialist in the development, sale and leasing of logistics and commercial real estate. In particular for industrial and logistics properties the region has made huge strides in recent years, he argued.
"A lot is happening not only in Ludwigsfelde, Eisenhüttenstadt and Großbeeren, but also in Grünheide and the twin city Frankfurt Oder / Slubice. In contrast to the past, there is not one big showcase project, but a multitude of different industrial and logistics settlements at various locations. Entire supply chains from the automotive and energy production sectors have now settled here."
"The list of location advantages is long: there are modern fiber-optic networks, a well-developed transport network of roads, railways, waterways and CT hubs, resilient power grids and a great deal of renewable energy. In many cases, Brandenburg can already supply itself with energy from the sun and wind," Bergmann said.
The region is well-placed to benefit from long-term trends, he said. "East Brandenburg and Frankfurt an der Oder are a hub between North and South, East and West. The importance of Brandenburg as an industrial and logistics location will increase, and the potential in the direct vicinity of the Berlin metropolitan region and Poland is great. Interest in sites in eastern Brandenburg is growing discernibly, with planned sites increasing just as much as inquiries."