Munich takes top spot as European city most attractive for real estate investment (DE)

Munich holds greater attractions for investors over the medium term than any other European city, according to a new study published by one of the world's leading global real estate investment managers. In its annual E-REGI index, LaSalle Investment Management ("LaSalle") found that Munich should withstand the current economic turmoil better than any other European location.

LaSalle found that Munich has strong levels of wealth, a highly-diversified local business structure, consisting of a mix of strong global players and a growing SME sector from various industries, which protects the local economy from the full impact of the global financial crisis. Munich offers particularly favourable business conditions, which are complemented by extensive R&D activities. In combination, these factors result in comparatively strong economic and employment growth forecasts despite the current slowdown.

Munich has become the first German city to top the annual index ranking and replaces London in the No. 1 position. Demand for real estate in London has fallen sharply over the last year, though its office market has seen the sharpest price reduction in Europe. While London's size and wealth have kept it in the top 10, weak GDP and employment growth expectations have weighed heavily against the UK capital in the latest Index.

Charles Maudsley, LaSalle Investment Management's Co-Head of Europe commented, "Notwithstanding its decline in the rankings, London remains a very attractive place for property investment because yields have expanded well beyond fair value even allowing for the weak demand outlook. More caution should be exercised outside London and its hinterland. EREGI continues to highlight the wide variation in prospects for the UK's provincial centres and the capital. This disparity in economic strength needs to be reflected in deal underwriting."

LaSalle compiled E-REGI by ranking the top 98 European cities using a combination of economic growth factors, the overall level of wealth, and the relative attractiveness of the local business market. As a result of the financial and economic turmoil, there are significant changes to the top of the ranking in 2009, to the benefit of wealthy cities and at the expense of locations whose ranking used to be driven by strong economic growth prospects.

Robin Goodchild, LaSalle's Head of European Research and Strategy, commented, "Investors need good local intelligence in this market. We have seen more change in 2009 among the top 10 cities than in any year since the E-REGI index was launched. Underlying wealth has been a big factor this year, with affluent locations such as the Swiss and Nordic cities, whose strong fundamentals help protects the economy from the effects of slower growth, doing well."

According to LaSalle, after a period of severe downwards revisions to GDP, property markets across Europe are probably approaching the bottom. However a recovery will be selective, with larger, more liquid markets seeing a growing share of activity, particularly in the prime segment.

Paris has retained its second place; in terms of the actual score, it is only marginally behind Munich, as in previous years. This was achieved partly on the back of sustained growth prospects; mainly however it is due to high wealth levels. As a result of the centralized political system, Paris is a major hub of administrative, economic and financial activity in France. It also serves as an important transport and logistics centre in France. However, while the local economy seems to be more resilient to the downturn than other major European locations, the downside of Paris' role as the main business hub in France is greater exposure to variations in (office) employment.

Reflecting Sweden's recent period of strong growth and its comparatively high levels of wealth, Stockholm has achieved its best ranking since 2000. In general, GDP in Sweden is projected to contract in 2009, reflecting the fall in confidence and activity in the wake of the global downturn. However, as the strongest c

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