Buying into a Berlin landmark at Am Tacheles
By Cecilia Chow
/ EdgeProp Singapore |
Bird’s eye view of the new urban quarter, AM Tacheles in the centre of Berlin, master planned by world renowned architects Herzog & de Meuron (Picture: JLL)
SINGAPORE (EDGEPROP) - At the centre of Germany’s capital, Berlin, is a new urban quarter, Am Tacheles, featuring interconnecting blocks of offices and apartments with retail at street level as well as a cultural component. Located in the Mitte district, Am Tacheles is masterplanned by Swiss architectural firm Herzog & de Meuron, which is famous for its design of landmarks such as the Elbe Philharmonic Hall in Hamburg, the Allianz Arena in Munich and the National Stadium in Beijing.
The new urban quarter sits on the site of the former Kunsthaus Tacheles art centre, a landmark of cultural significance. A 97,000 sq ft building with graffiti-covered walls, it was the epicentre of Berlin’s independent art and culture for 22 years (from 1990 to 2012), after the fall of the Berlin Wall in 1989. While the interiors housed artists’ studios, workshops and a theatre, the external courtyard became a sculpture park, featuring open-air exhibitions of metal sculptures as well as galleries and studios of sculptors and painters.
Built in 1907-09, the five-storey building of reinforced concrete began life as an opulent shopping arcade and department store.
Diagram of the interconnecting blocks of apartments, offices and cultural activities with retail at street level at the upcoming Am Tacheles (Photo: JLL)
From the late 1920s to 1930s, the building served as the House of Technology, the showroom of electrical company AEG. During World War II, it was used briefly as a prison, and was partially destroyed. In the post-war years, it functioned as a school for artists, the headquarters of the Free German Trade Union Federation, a dance school, a nightclub and a cinema, before it morphed into the Kunsthaus Tacheles art centre. It was subsequently abandoned before its recent gentrification.
In its latest reincarnation as Am Tacheles by Herzog & de Meuron, the new development is expected to breathe new life into the urban fabric of the centre of Berlin. Construction began in 2019 and is scheduled for completion by the end of 2023.
The new apartment blocks at Am Tacheles have been launched for sale in phases, starting from July 2020. The first four phases are almost fully sold, says Chua Shir Yee, JLL head of sales, international residential, Singapore. The fifth and latest phase, Suites, an apartment block with just 54 units, was released a month ago. To date, more than 10% of the units have already been reserved or sold.
Artist’s impression of the façade of the latest phase launched at Am Tacheles, the 54-unit Suites (Picture: JLL)
Of the 54 apartments, 51 are a mix of studios, one- and two-bedroom units, with sizes ranging from 41 to 78 sq m (441 to 840 sq ft). The remaining three units are two- to five-bedroom penthouses of 164 to 344 sq m (1,765 to 3,703 sq ft). Prices of apartments at Suites start from about EUR700,000 ($994,000).
Strong rental demand
The strong demand for apartments at AM Tacheles reflects the shortage of newly built, modern apartments, which have not caught up with rising rental demand, according to JLL. The city’s rapid growth has made it a destination for start-ups and tech companies. “In addition to creative and cultural industries, tourism and biotechnology, Berlin has become one of the most important international centres for innovative start-ups over the past decade,” says Dr Sören Gröbel, JLL director, research, Europe, in his report on Berlin at the end of 2021.
Germany ranks as the world’s fourth biggest economy, according to the World Bank, and has an expected GDP growth of 4.2% in 2022, after a 2.7% increase in 2021, based on JLL data. The unemployment rate stood at 3.2% as of November 2021.
In terms of investment and development opportunities for the year ahead, Berlin has its own special appeal, particularly for international investors. Hence, it was ranked second only to London, according to the report, “Emerging Trends in Real Estate, Europe 2022”, by PWC and Urban Land Institute (ULI).
The statistics point to a favourable real estate investment market: Due to the booming economy, 20,700 new apartments are required annually. There is a shortage of 250,000 apartments in Berlin as of September 2021, with vacancy rate at 0.9%.
Berlin’s population in 2022 is 3.57 million. The homeownership rate in the capital city, however, was just 17.4% as of September 2021, which is low by international standards, according to JLL. Overall, Germany has a home ownership of 50.4% as of 2021.
According to the PWC-ULI report, housing shortages across Europe are attracting leading institutional investors, which have previously shunned the sector, to increase their exposure.
Supply or lack thereof
In Berlin, post-war era buildings (1949-78) still represent the largest share of the housing stock today, at around 35%, according to JLL Research. Private construction activities for the rental market in East Germany virtually ceased in the post-war period.
From the 1970s, the residential buildings were predominantly industrially prefabricated, and these still characterise the urban landscape in many eastern German cities today. Government loan subsidies, accompanied by housing rental caps in both East and West Berlin, gave tenant protection a huge boost, notes JLL. This made renting more attractive than homeownership.
Artist’s impression of residents’ swimming pool at Suites (Picture: JLL)
Higher real estate prices, which in absolute terms means more equity is required to purchase residential property, have also contributed to the historically low home ownership rate in Berlin. The share of owner-occupied housing, however, is higher in new-builds and relatively younger housing stock.
The new-build segment therefore plays an important role in the overall owner-occupied housing market. It has increased significantly over the years. According to JLL, just under 5,000 new residential units were built in 2010. In 2019, the number of completions reached a level last seen in the late 1990s at just under 19,000 new housing units, before declining to around 14,500 new homes in 2020.
Of these new completions, an average of 30% to 40% were attributable to the rental housing market, with another 40% to the owner-occupied housing market, and the remaining residential units to single- and two-family homes, says JLL.
Artist’s impression of an apartment at Suites, which has 51 studios to two-bedders and three penthouses (Picture: JLL)
Rental yields, prices
Average rental yields in Berlin are between 2% and 3%, estimates JLL, and have remained stable at those yields for the past decade. Asking rents in Berlin continue to rise: In 2H2021, the rental rate was EUR13.85 psm per month, 4.1% higher y-o-y.
Purchase prices for owner-occupied apartments in Berlin have also risen. Median asking price in 2H2021 rose 11.6% y-o-y to EUR5,560 psm, says JLL in its February 2022 report. That increase represents a doubling in growth momentum compared with 1H2021 (+6.0%), and a 2.4% rise relative to the five-year average price growth.
The biggest uncertainty currently relates to inflation and supply chains, which are mostly impacting construction prices and delivery schedules — “just at a time when the industry wants to resume delayed developments or advance repurposing initiatives”, says the PWC-ULI report. “As a consequence, we are seeing strong sentiment swings, as the industry struggles to interpret the potential impact of supply chain disruptions, surging energy costs and labour shortages on real estate, and how long these issues might last.”
Source: JLL
The Russia-Ukraine war has also led to high energy prices, food crises, high inflation and high interest rates across the world, notes JLL’s Chua. However, this has not reduced the attractiveness of the residential real estate sector, which has proven to be resilient even during the pandemic, she adds. “The residential market has also been the least affected asset class compared to stocks, crypto currencies and bonds,” she adds.
Investors in Singapore looking for an alternative investment destination could consider Suites in AM Tacheles, come late August, at a JLL property showcase.
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