Berlin: Cultural Capital

Berlin: Cultural Capital

With ongoing migration to the city and prices well below those of other European capitals, Berlin’s property market is poised for growth.

In Berlin’s Mitte district, a new luxury tower stands at the banks of the Spree River just feet away from one of the last remaining sections of the Berlin Wall. Fifty years ago this was the epicenter of the Cold War, a dead zone that divided the city and the European continent. Even twenty years ago as the rebuilding efforts began the area was largely desolate. But today, Berlin’s landscape is changing and developers hope to redefine the unified city’s new central district “Mitte” as the epicenter of Berlin’s burgeoning property scene.  

The new tower is called Living Levels and it features 13 stories of modern, open-plan apartments and a soaring penthouse unit that spans the entire top floor and has four-meter ceilings, sweeping city views and a price tag of US$6.7 million.  Currently the tower stands somewhat removed from the buzz of the city, but plans are in the works to build a new bridge over the Spree River connecting residents with trendy nearby neighborhoods. There will also be a café in the ground floor and a riverfront path. 

 Living Levels, photo courtesy of Zabel Property Group

Living Levels, photo courtesy of Zabel Property Group

With its wide boulevards, low-rise buildings and large leafy parks, Berlin feels remarkably relaxed compared with London, Paris or other world capitals. Bicycles rule the streets here and what my taxi driver calls rush hour feels like average midnight traffic in Manhattan.  This relaxed lifestyle is a large part of the city’s appeal. Artists and cultural entrepreneurs have long settled here, but in recent years, lured by the country’s stable economy, quality of life and good schools, international investors have also started buying property in Berlin, particularly in the Mitte and the upscale western neighborhoods of Charlottnburg-Wilmserdorf.  

With prices still well below those of other leading European cities, a shortage of new buildings and continued migration to the city, real estate professionals are confident that Berlin’s property market is poised for sustained growth. “We are still at the toddler stage,” says Thomas Zabel, Founder and CEO of Zabel Property Group, which specializes in marketing high-end apartments in Berlin Mitte. “We have 40,000 people moving to Berlin each year, and only about 6,000 to 8,000 apartment being built throughout the city.”

Since 2010, the stock of residential space in Berlin has risen by 0.8% -- or 15,500 residential units. This compared to the rise in population of almost 150,000 people over the same period has created a surplus demand in the residential market and an upward pressure on prices.  According to a recent report from Jones Lang LaSalle, the average asking price for condominium apartments rose to €2,900 per sqm in the second half of 2014, that’s 12.8% more expensive than the year previous. And the trend is set to continue. 

“In view of the low level of new-build volume, the high level of demand resulting from low interest rates, the lack of investment alternatives and the low purchase prices compared to other German cities, it is very likely that there will be further price increases in 2015,” the report states.

But while the market exhibits an upward pressure, Berlin’s political and regulatory bodies are doing their best to keep the market cool. The latest measure is a cap on rental increases.  From June 1, 2015 landlords in the capital will be barred from increasing rents by more than 10% above the local average. Such controls were already in place for existing tenants but have now been extended to new contracts. In Germany over 80% of citizens rent their homes, and although Berlin rents are still low compared with other European capitals, they increased by more than 9% between 2013 and 2014. The new law, which was passed by parliament in March, aims to prevent gentrification and urban displacement -- most Berliners can no longer afford to live in the city center -- but for real estate professionals, the political interference is a source of frustration. 

“There is a manifest political bias against homeownership,” says Nils Werner, General Manager IVD Berlin-Brandenburg, a real estate advisory firm. He cites the rent ceiling, a condo-conversion ban and expansion of areas deemed historically protected as examples of Berlin policies that stymie residential development.  “It’s bad for the rental market too,” he says. “Owners won’t invest in their properties because they can’t get the market rate. Many renters have leases that are 20 years old.” 

Given the city’s political and economic context it’s not surprising that foreign nationals (from within the EU and from the Americas, Russia and Asia) have been the ones investing in new-build projects in Mitte, around Alexendar Platz and along near the Spree River. “70% of all of our clients are foreigners,” says Thomas Zabel. “Foreigners are more sophisticated as investors. They understand that growth is immanent and that we will one day be listed along with Paris, London and New York.”

The draw of living in Mitte is its centrality and easy access to various transport links, as well as proximity to government and embassy buildings and museums and other cultural centers.  One of the first high-end residential projects to launch in Mitte, yoo Berlin, is located beside the historic Berliner Ensemble, the theater founded by Berthold Brecht.

 Loft at yoo Berlin, photo courtesy of Zabel Property Group

Loft at yoo Berlin, photo courtesy of Zabel Property Group

Developed by Peach Property Group and inspired by French designer Philippe Stark, yoo Berlin features 95 units, a hotel component and an onsite spa and pool. Two units are currently on the market with Zabel Property Group, a 311-sqm Art Loft townhouse on the ground floor listed for US$3.8 million and a 251-sqm penthouse for US$7 million.  The ground floor unit was designed as a contemporary take on the classic Berlin townhouse and features a light, airy design with floor-to-ceiling-doors, a sunken living room, and a sleek kitchen with top of the line appliances. The penthouse, located on the 8th floor, features an open kitchen and dining area flanked by tall windows that open onto a terrace.

 yoo Berlin Penthouse, photo courtesy of Zabel Property Group

yoo Berlin Penthouse, photo courtesy of Zabel Property Group

Another property that recently launched in Mitte district is Metropol Park. Located just east of Museum Island near the Chinese and Brazilian embassies, the project features an expressionist red brick façade dating back to the 1930s and a collection of contemporary loft apartments. The units range from 613 to 4,090 sft and are available in a variety of layouts from one to five bedrooms. Many feature open-plan kitchens, balconies and soaring 25-foot ceilings. “While the cosmopolitan lifestyle of Berlin-Mitte buzzes around it, this elegant retreat in the small embassy district provides a view of the park,” says Georg Georg Bartsch-Gerstner of Salesground Services who is marketing the project. Metropol Park also includes outdoor courtyards and underground parking. Prices range from €4,000 to €15,000 per sqm.

Not all developers are focused on Mitte, however. The historically affluent neighborhood of Charlottenburg is also popular among investors and it offers a more residential feel. Located near many of the city’s best schools and the ambassadorial district of Grunewald -- home to stately villas, lakes and forests -- the western district is what the writer Thomas Wolfe once called “Europe’s biggest café”. Leafy boulevards are lined with luxury boutiques, theaters and Parisian-style cafes. The buildings that survived WWII feature grand proportions, three to four-meter ceilings, tall French-style doors and cast iron railings.  

 Eisenzahn 1 is located in Charlottenburg

Eisenzahn 1 is located in Charlottenburg

Ralph Schmitz, one of Berlin’s longest standing developers is currently constructing Eisenzhan 1, a new luxury building inspired by the area’s regal turn of the century homes. The project will feature a palatial façade with pilasters and cornices reminiscent of the style that originally flourished in the area. For the interiors, the developers partnered with Botega Vanetta who is furnishing the public areas, the lobby and loggia and the show flat. 

 Courtyard at Eisenzahn 1

Courtyard at Eisenzahn 1

“Our family has been building in Berlin since 1864 and we have always focused on craftsmanship. It’s not about show. It’s about attention to detail,” says Daniel Schmitz, Director of Sales and Marketing. With this project he aims to return to the grandeur of the turn of the century apartment, and he believes now is the perfect time. “After the wall came down everyone thought the interesting part of the city would be Mitte. But now West Berlin is on a come back,” he says. 

Schmitz believes the proximity to good schools and leisure facilities, as well as the boutiques and theaters will continue to draw affluent buyers to the area. So far he has sold seven of the 12 apartments to a mix of local and foreign buyers.

If Germany is known for prizing efficiency over excess, this runs through even its most luxurious endeavors. There are no pet programs, yoga studios or spas at Esenzhan 1. Owners will have underground parking and access to a shared private garden, but the project’s focal point is residences designed to grand proportions and with choice materials including oak floors, 10.8 foot ceilings, wood-burning fire places and kitchens fully equipped with appliances from Gaggenau. 

 Penthouse at Eisenzahn 1

Penthouse at Eisenzahn 1

The three-bedroom residences start at 2,067 sft (US$2 million) and range up to 5,035 sft for the penthouse unit that encompasses the building’s top floor and includes roof garden access with 360° views of Berlin.  The penthouse is priced at US$9.5 million and to Schmitz’s knowledge is currently the city’s most expensive listing. Unlike New York or London, Berlin’s prices don’t shoot the moon.  One upside of the city regulations is precisely that they prevent Berlin’s market from becoming speculative.  “This is not a market for investors looking to turn a quick profit,” says Peter Rabitz of Zabel Property Group. “It offers stable, increasing capital gains.”

This story appeared in the Summer 2015 issue of Palace

On the Waterfront: Miami

On the Waterfront: Miami

Cool Pools: Developers Add Balcony Pools To Their Residential Offerings

Cool Pools: Developers Add Balcony Pools To Their Residential Offerings