In the search for safe havens, German cities will be Europe’s most preferred real estate investment and development destinations in 2017, according to Emerging Trends in Real Estate® Europe 2017.

Berlin, Hamburg, Frankfurt, and Munich occupy four of the top five spots for 2017 investment and development prospects in the annual forecast published jointly by the Urban Land Institute (ULI) and PwC. The report is based on the opinions of almost 800 real estate professionals in Europe, including investors, developers, lenders, agents, and consultants.

According to the report, the top five European markets for real estate investment and development[1] in 2017 are predicted to be:

1-Berlin

The German capital scored the highest on all four survey categories: investment, development, and prospects for rental and capital growth. Berlin has established itself as a large, highly-liquid real estate market with global appeal—evidenced by the €3.9 billion invested in the city in the first six months of 2016, according to Real Capital Analytics. Despite steep pricing, the office and housing markets are still thriving due to their strong growth potential.

2-Hamburg

At number two for the second year running, Hamburg’s success is due in part to the local government’s massive investment in transport and the development of new, high quality urban districts along its waterfront. Hamburg’s liveability and its diverse economy, which encompasses manufacturing, media, life sciences, and information technology, also bolster its high standing. Rental growth of 4% over the past year helps to explain the popularity of Hamburg’s office market, together with yields of 3.75% for prime assets, which although expensive are still cheaper than those achieved in the city’s German rival, Munich.

3-Frankfurt

Investors are largely optimistic about Frankfurt, which has climbed 11 places to number three. Not only is it considered a stable market amid post-Brexit uncertainty, but it is also predicted by many investors to provide an office destination for bankers relocating from the City of London. However, questions remain about the potential consequences of relocating large banking operations to Frankfurt, as Germany is already over-banked.

4-Dublin

While it has slipped one place to number four, Dublin is still seen to be an overall beneficiary of Brexit. One private equity investor predicted that while the city will likely not pick up financial services headquarters from the UK, it will pick up back-office functions, which could still have a big effect on the market. Continued economic growth, foreign direct investment, and strong demand in the housing market also play an important role in Dublin’s prospects for 2017.

5-Munich

Rounding out Germany’s near-dominance in the top five is Munich. Investors perceive Munich as a perennially solid bet, a quality that is particularly valuable in a risk-off environment. Survey respondents indicated that buying property in cities like Munich allows investors to take on more risk without worrying over the basic security of their investment. While vacancy rates in Munich are at a 14-year low of 4.8%, finding assets to buy is challenging and the city remains one of the priciest markets in Europe.

Top 10 European Cities for Property Investment and Development

2017 Ranking 2016 Ranking Change

1 Berlin 1 ↔0

2 Hamburg 2 ↔0

3 Frankfurt 14 ↑11

4 Dublin 3 ↓1

5 Munich 5 ↔0

6 Copenhagen 4 ↓2

7 Lisbon 16 ↑9

8 Stockholm 6 ↓2

9 Madrid 8 ↓1

10 Lyon 25 ↑15

Source: Urban Land Institute (ULI)