Second-tier cities post best risk-return ratios in Germany
Second-tier cities in Germany are outperforming their prime counterparts when it comes to risk-return ratios.
DEMIRE Deutsche Mittelstand Real Estate and the bulwiengesa research institute have found that cities such as Bonn, Dortmund, Koblenz and Essen have more favourable real estate investment conditions than the likes of Berlin and Munich when net initial yields and office rent volatility are used as a performance benchmark.
In a survey called Office Real Estate Market: Investment Opportunities in Secondary Locations, the two organisations compare 31 selected second-tier cities in Germany with the country’s “Big Seven” cities. The second-tier cities offer higher return potentials than the seven class A cities and boast greater income stability. According to the survey, the range of net initial yields in second-tier German cities extends from 4.1 percent in Bonn to 7 percent in Stralsund and Chemnitz. In the class A cities, by contrast, net initial yi