Counting the cost of inward migration on real estate

COMMENT What do Stockholm, Hamburg, Munich and Berlin have in common? According to Savills Impacts research, they are all set to see significant net inward migration over the next few years (4% increase on the current population in Stockholm, 3.9% in Munich, 2.6% in Hamburg and 2.4% in Berlin).

However, these four cities are also at the top of the list when it comes to low office vacancy rates in Europe (Berlin: 1.5%, Hamburg: 4.2%, Munich: 2.2% and Stockholm: 2.9% in Q1 2019).

Often when there is virtually zero office stock, coupled with high employment figures there can only be one direction for rents to travel: up. The same of course applies for residential property prices and rents, which will see increasing population demand meet decreasing real estate supply.

Rising office rents

This growth is already happening. Prime CBD office rents in Hamburg, for example, have increased by 5.9% so far this year alone, and Berlin residential asking rents have risen by 26% in the past five years.

In Europe, cities that are vibrant and have a strong economy have long attracted both domestic and international migrants.

Notably, economic arrangements that have allowed people to move relatively freely have made many northern and western European cities attractive to workers from the east and south who are seeking better employment opportunities.

However, wages are not the only pull factor. For instance, Sweden and Germany also score well in quality-of-life rankings and tied to this are the comparatively generous welfare systems, including good pensions and healthcare.

Additionally, smaller cities with good job opportunities, particularly in the technology sector, will be attractive to mobile and well-educated millennials.


Yet, too often, cities do not keep up with the growing demand for real estate and infrastructure.

An exception to the rule is Sweden, where city planners are already ahead of the game. In late 2017, Stockholm saw the introduction of the Stockholm City Line, a 6km, double-track commuter train tunnel beneath the city centre.

Long-distance and commuter trains operate on different tracks so that the capacity is doubled and rail traffic congestion is reduced significantly.

So what next? As a city grows, the ability to accommodate new arrivals will be critical to its success. This includes providing suitable housing and office space and ensuring there is sufficient infrastructure in place. One solution might be a closer collaboration between planners, local governments and developers.

With this in mind, one to watch in this regard is the Grand Paris project, which aims to improve life for residents and to even out disparity between territories while building a sustainable city.

Eri Mitsostergiou is director of European research at Savills