Could Düsseldorf’s property market fall victim to its own success?

Düsseldorf’s reputation as a safe haven with stable growth has helped the city’s real estate sector flourish and attract investors. However, analysts say that land availability could become a challenge.

The city has seen some major developments in recent years, with more on the horizon. These include the start of construction of Kö-Bogen II – the transformation of the city centre – with the demolition of the Tausendfüßler (a former flyover) and cars being routed through tunnels under the city. Additionally, the opening of the Wehrhahnlinie metro line, the establishment of a high-rise building for L'Oréal, the completion of Le Quartier Central in 2018 with residential tower blocks, offices and hotels, and the creation of Media Harbour have all garnered headlines.

The city’s favourable location, positive economic indicators, excellent transport connections and above-average spending capacity have fed into the residential and retail markets, making it particularly attractive for both national and international investors.

Home comforts

“The city of Düsseldorf has initiated the 'ZukunftWohnen' action plan for the future residential market,” says Marcel Abel, managing director at real estate agency JLL Düsseldorf. “This aims to further improve and develop all parts of the market, ensure the development of residential housing in all price segments and guarantee the quality of urban development and architecture.”

Many people in the city talk about the challenge of land availability for residential and business use, however. “The scarcity of land in the city has pushed the transformation of office space into residential areas,” says Mr Abel.

For example, the area around the Seestern office district is currently in the spotlight for residential developers. One example of a successful transformation from office space into residential areas is the White Max, Dusseldorf’s tallest residential building. There has also been the creation of skyscrapers for residential housing in high-quality areas, such as Pandion d’Dor and Ciel et Terre.

Andreas Fleischer, business unit director for northern Europe at property investment and development company Segro, is also concerned about land availability. “We think it’s very important to keep industrial sites inside cities because you want short distances not only for residential and office but also for production. We see new technology, such as 3D printing, bringing production back into cities,” he says.

A good alternative

Düsseldorf’s commercial property market is becoming increasingly interesting to investors. It is typically a location for investments of about €30m to €70m. “Only a few transactions have been greater than €250m, such as that for Kö-Bogen I, prospective Kö-Bogen II and Headquarter WestLB,” says Andreas Siebert, team leader for retail investment at JLL Düsseldorf. “It’s still relatively unknown, so it’s a good alternative for international investors. The yield, currently at 3.9% to 4%, is slightly higher compared with the yield across Germany, but will end up [at] about 3%.”

Segro’s north European headquarters are in Düsseldorf, and companies located on its sites include Lush and Tesla. Its business units in the Düsseldorf region currently take up 340,000 square metres of letting space, at a value of €328m. “Our portfolio of light industrial and warehousing premises is growing, mainly driven by e-commerce and opportunities in the fresh logistics market,” says Mr Fleischer.

The company is actively looking for another location in the city. “Düsseldorf has more demand than we can provide for at the moment. The urban logistics market is growing so we will see a further push coming from fresh logistics and food,” adds Mr Fleischer.