Last month, we discussed how Frankfurt was emerging as the clear winner. When UBS staff were asked to rank which city they would prefer to be relocated to, their options were Frankfurt, Amsterdam and Madrid. Our top picks would have been Paris and Dublin, which didn’t even make the short list. On 19 October 2017, Goldman’s Chairman, Lloyd Blankfein, garnered lots of media attention after he tweeted.
"Just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I'll be spending a lot more time there. #Brexit."
If Lloyds is thinking about buying himself a smart pied-a-terre in Frankfurt, he’s going to have plenty of options as a Brexit-driven construction boom is taking place in the city. The sharp rise in residential property prices is justifying the construction of “skyscrapers”, as Bloomberg explains.
The prices for new condominiums in Frankfurt have now reached such a high level that it pays off for project developers to build high-rise residential buildings and more and more such towers are being built in the German financial capital. This emerges from an assessment by consulting company Bulwiengesa AG.
In 2017 alone, asking prices rose by 15 percent compared to the previous year. A total of eight residential high-rise buildings have been completed since 2014 in the city. 20 more could be added by 2022. Five are currently under construction and another 15 are planned. These are key findings of the study.
"The cost of building skyscrapers is about twice as high as in ordinary multi-storey housing," Sven Carstensen, Frankfurt branch manager at Bulwiengesa, said in an interview with Bloomberg. "Therefore, you also need correspondingly higher revenue."
He explains the increase in prices above all with the high demand pressure. Unlike other cities, Frankfurt offers little land potential. That applies especially in the city center, he said. Skyscraper are the answer. A factor should also be the exit of Great Britain from the EU. "The expected influx of Brexit newcomers will help to absorb the volume of high-rise housing," Carstensen said.
One of the highest profile of the new residential skyscrapers is the 51-storey Grand Tower which, conveniently, has been under construction since the beginning of 2016 – although the Brexit vote was not until 23 June 2016. The Grand Tower will be Germany’s tallest residential building at 172 metres and contain 401 apartments and penthouses.
It’s clear that many thousands of jobs will relocate from London, even if some banks, like UBS, are reversing their initial apocalyptic estimates (one fifth of its 5,000 strong workforce). While the exact figure is subject to debate, some commentators are predicting that Frankfurt will be the recipient of more than half. Bloomberg continues.
While it is unknown how many bankers will ultimately move to Frankfurt, there are plenty of forecasts. "We expect that at least half of London’s declining financial jobs will be relocated to Frankfurt, which will be at least 8,000 employees over a period of several years," Helaba Chief Economist Gertrud Traud said at the end of August.
According to Bulwiengesa, this year’s highest construction activity for new condominiums overall, not just for high-rise buildings, can be found in downtown Frankfurt. The consulting firm identified 24 projects with around 2200 apartments in this area. The company takes a closer look at the market once a year. The weighted average price of new condominiums is around 6190 euros per square meter in Frankfurt, according to the data.
Skyscrapers are not new for Frankfurt. In the office sector, they have long dominated the skyline. But now they are increasingly being built for apartments. Carstensen: "There are thus few acceptance problems - both from the administration and from the urban society".
While the shiny new towers will help, Frankfurt’s attempts to shake off its dull image and promote itself as a “lifestyle destination” still ring a little hollow. As the architecture magazine, Dezeen, noted.
Frankfurt lacks the cultural and lifestyle attractions of London as well as continental rivals such as Paris and Amsterdam, but is now working hard to become more appealing to high-spending financial workers.
Time will tell, but our question is how will the former London-based UBS or Goldman employee, who relocated to Frankfurt, feel on a cold Monday night as he sips a glass of Riesling 25 floors up in his glass tower?