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Property Prices in Frankfurt – Needs, Challenges, and Outlook

Interview With Real Estate Agent Dean Vukovic

The Frankfurt city region has been a magnet for tens of thousands of new residents for years. The core city of Frankfurt alone has grown by more than 100,000 inhabitants in the last 10 years, which corresponds to an increase of around 16 percent. You have the feeling that there is construction going on everywhere. However, real estate experts say that the number of apartments is currently insufficient and that not enough will be done for the future either. SKYLINE ATLAS would therefore like to know from Dean Vukovic what his experiences and outlooks around the Frankfurt real estate market are.

Dean Vukovic is the managing partner of V&V Immobilien GmbH in Frankfurt. He and the V&V Immobilien team advise clients looking for a property or a sale. Customers include owner-occupiers and investors. V&V Immobilien focuses on the marketing of residential properties in the Greater Frankfurt Area. On the commercial side, V&V Immobilien primarily advises companies on the search for commercial or office space. V&V Immobilien is also active in the area of investment advice and brokerage.

Dean Vukovic - Real estate consultant in Frankfurt - expert on apartments and offices in Frankfurt

Dean Vukovic

“In the short term, some companies could even require more space if, for example, appropriate social distancing rules are established over the long term.”
Dean Vukovic on the space requirements of companies in the corona crisis.

SKYLINE ATLAS: Hello Mr. Vukovic. Thank you for taking the time to talk to us. As a Frankfurt real estate agent, you deal with many interested parties every day. What effects does the corona crisis have on the real estate market in the Rhine-Main area?

Dean Vukovic: In the long term, the German market could definitely benefit. But in the short term, the demand for rental space and commercial property may decline temporarily. Many companies, for example those who had planned to move, are more likely to think about lease extensions than to consider moving. In the transaction sector, too, restraint is currently the motto. Planning for new projects will be more challenging, existing projects will have difficulties with the completion dates. In addition, many companies will evaluate the experience with new concepts, such as the home office, and adjust their future space requirements accordingly.

In the residential real estate sector, the demand for living space in Frankfurt is stable and high, so prices will likely remain at least at the current level.

However, the corona crisis has caused interest rates on construction loans to rise, making financing more difficult for private individuals. In addition, many banks have tightened their lending guidelines. Nevertheless, the residential property market should emerge stable from the crisis, as it is still considered to be crisis-proof, especially for investors.

Ultimately, however, a reliable prognosis is difficult, as everything depends on how long the current situation lasts.

Dean Vukovic - V and V Immobilien in Frankfurt - property agent Frankfurt - real-estate advisor in the Greater Frankfurt area
V&V Immobilien Frankfurt - Real Estate Agent for Greater Frankfurt Area and Offenbach - Rhein-Main area
V & V Immobilien Frankfurt - Lange Strasse - clients can visit the store to get informed about real estate topics

The office of V&V Immobilien at Lange Strasse, Frankfurt (view on Google Maps)

SKYLINE ATLAS: More and more people have been drawn to Frankfurt in recent years, mainly for work reasons. What are the best neighborhoods for singles and families?

Dean Vukovic: The districts Bornheim, Nordend, and Bockenheim are particularly popular with singles and young professionals as well as young families. There are cafes, restaurants, supermarkets and countless shops and an excellent infrastructure. Families who have moved here particularly appreciate the European District due to the large number of spacious new apartments and the very international population structure. Here, too, an excellent infrastructure has developed in recent years.

For high earners, Frankfurt’s Westend is of course still the ultimate. However, it can basically be said that each of the Frankfurt districts has its advantages and can cover the various needs.

Dean Vukovic - Managing Director and CEO of V&V Immobilien in Frankfurt - office space consultant Frankfurt - real estate agent

Always at work, the phone never stands still.

SKYLINE ATLAS: More and more people have been drawn to Frankfurt in recent years, mainly for work reasons. What are the best neighborhoods for singles and families?

Dean Vukovic: The districts Bornheim, Nordend, and Bockenheim are particularly popular with singles and young professionals as well as young families. There are cafes, restaurants, supermarkets and countless shops and an excellent infrastructure. Families who have moved here particularly appreciate the European District due to the large number of spacious new apartments and the very international population structure. Here, too, an excellent infrastructure has developed in recent years.

For high earners, Frankfurt’s Westend is of course still the ultimate. However, it can basically be said that each of the Frankfurt districts has its advantages and can cover the various needs.

SKYLINE ATLAS: With your company V&V Immobilien you mainly advise private property buyers, but also capital investors. What are you looking for at the moment?

Dean Vukovic: Small apartments with 1-2 rooms are of course very popular with private investors. On the one hand, the proportion of single households has increased significantly in recent years and, on the other hand, Frankfurt, as an international financial location, is of course also the point of contact for employees from all over the world who are staying in Frankfurt for a limited period of time and do not want to spend it entirely in the hotel. This also results in the extensive range of serviced apartments and furnished apartments in Frankfurt. For owner-occupiers, of course, real estate is of particular interest if it takes into account life planning such as starting a family, etc. The size and the infrastructure and connections play a role here.

Otherwise, we naturally have requests for investment properties such as residential and commercial buildings and apartment buildings.

SKYLINE ATLAS: Is lack of capital or lack of land a problem right now? In your opinion, what can politics do to ensure that more and, in particular, affordable housing is created?

Dean Vukovic: Definitely the lack of land. Building land is the basic requirement for urgently needed housing construction. For example, all federal land and properties that are not required for state purposes could be made available and sold via an accelerated award concept. Commercial wastelands that are no longer needed should no longer be a taboo subject and should be considered for the development of urgently needed living space.

The acceleration of planning and approval processes as well as the harmonization of building regulations, which are still a matter for the federal states, would also promote development.

Thousands of building regulations make building unnecessarily expensive and result in higher prices. Here, too, everything should be put to the test.

Last but not least, there are also tax issues, the adjustment of which would encourage the construction of more homes, such as increasing the straight-line depreciation

Real estate consulting boutique offering property investment consulting

Dean Vukovic (right) in conversation with a work colleague.

SKYLINE ATLAS: According to our observation, new apartments in particular are still not rented months after completion. Why is that?

Dean Vukovic: In addition to “speculative vacancies”, many of the apartments are offered furnished. Of course, this removes the apartments from the classic rental market.

SKYINE ATLAS: It is repeatedly criticized that only luxury apartments are being built in apartment towers. However, an example in Berlin shows that housing associations can also build new residential towers. Is it conceivable that public housing associations will also dare to consider affordable housing in high-rise buildings?

Dean Vukovic: For classic project developers, the subject of “affordable living” in high-rise apartment buildings is difficult due to the reasons mentioned above, such as building regulations, expensive land purchases and many other regulations that make construction more expensive and thus leave little room for maneuver in pricing. Housing cooperatives definitely have the necessary know-how to implement such projects. But here too we face the same problems. In order to create affordable apartments, the remaining units would have to be offered even more expensively. The only thing that helps here is to put all regulations to the test in order to be able to reduce manufacturing costs.

Real property agent at work in Frankfurt - investments in Frankfurt real estate and consulting

SKYINE ATLAS: It was said in media reports about the future high-rise master plan that the City of Frankfurt wants to designate fewer or no new locations for residential towers. What does politics expect from it? What do you recommend?

Dean Vukovic: Excluding further residential high-rise buildings per se is not a solution. More important are regulations that prevent the majority of the apartments being built here from degenerating into speculative properties and standing empty, as is currently the case in some new construction projects. High-rise residential buildings in Frankfurt can definitely help relax the real estate market, more than building sites for terraced or semi-detached houses that cannot even come close to meeting future needs. Here the city has to open up to this and flexibly adapt development plans in individual cases without having to open the gates for the next satellite cities.

Highrise Master Plan Frankfurt 1998

SKYLINE ATLAS: Couldn’t cities like Vancouver or Toronto be used as model for new residential towers? Living there in the high-rise works reasonably well?

Dean Vukovic: Excluding further residential high-rise buildings per se is not a solution. More important are regulations that prevent the majority of the apartments being built here from degenerating into speculative properties and standing empty, as is currently the case in some new construction projects. High-rise residential buildings in Frankfurt can definitely help relax the real estate market, more than building sites for terraced or semi-detached houses that cannot even come close to meeting future needs. Here the city has to open up to this and flexibly adapt development plans in individual cases without having to open the gates for the next satellite cities.

Toronto Skyline Skyscrapers

SKYINE ATLAS: Let’s talk about the Frankfurt office market. In times of the corona crisis, how do you rate the realistic chance that construction of the Millennium Tower will actually begin in the next few years? How high do you estimate the pre-letting rate required for this?

Dean Vukovic: With regard to the Millennium Tower, the project developer CA Immo and the City of Frankfurt have already announced that they will publish further information on planning in a timely manner. Basically, I think that CA Immo is very well positioned and that the current situation will not change anything in the project. What will possibly be reevaluated is the planned mix of uses.

However, I am convinced that a possibly necessary pre-letting rate can be achieved. Based on the information communicated so far, a landmark building will be created here that of course offers potential tenants its charm. Furthermore, the effect should not be neglected that such projects offer the possibility of using older office buildings for a new purpose, for example as living space. Of course, the city is also in demand here.

Frankfurt CBD

SKYINE ATLAS: Have you already felt the direct effects of Corona and the increased trend towards home offices on the office space market in Frankfurt? Do you expect delays or even investment freezes in projects such as the FraSpa tower or the site of the old police headquarters?

Dean Vukovic: There is no doubt that the current situation has driven a rethinking and also an acceleration of digitization that would otherwise not have taken place on this scale. However, it must be observed over a longer period of time whether employees can really work as efficiently in the home office as in the office. Furthermore, the much-cited work-life balance could become a problem in the long run if there is no longer a clear demarcation between work and private life. Many companies are now in a test phase in this regard and of course it cannot be ruled out that this will also have an impact on the office space market in the future. However, these are not yet foreseeable for me. In the short term, some companies could even require more space if, for example, appropriate social distancing rules are established over the long term.

There is no question that current projects are being scrutinized. And usage concepts may be reconsidered and adapted to the situation. So it can of course happen that the exclusive use as an office building is abandoned and the focus is increasingly on mixed use as office, residential, hotel and commercial property, as has already been successfully implemented in some real estate projects.

Consulting for real estate buyers in Frankfurt

SKYLINE ATLAS: What are your forecasts with regard to the Frankfurt real estate market for the next few years?

Dean Vukovic: In an international comparison, the prices for real estate in Germany are still comparatively low, however much that will surprise even the desperate investor or owner-occupier who has been looking for an “affordable” property for ages. The price development of real estate depends on a large number of criteria such as income development, the economy, interest rate development and population growth.

I therefore assume that prices in the economically strong regions such as the top 7 real estate locations in Germany will continue to rise over the next few years, whereas prices in rural and structurally weak regions will tend to stagnate or even fall.

Property consultant Dean Vukovic in front of the Frankfurt city map - an expert of Frankfurt real estate investments

SKYLINE ATLAS: Thank you for the interview.

The interview was conducted by Michael Wutzke and Martin Bischoff in September 2020. Translated by Daniel Kieckhefer.