(Editor’s note: Trying to figure out how these projects are financed is difficult, because unlike in the United States, there’s little or no disclosure in public-private ventures in Europe. That is, how the capital stacks are arranged is unclear in the percentage of senior-secured debt, government funding, private risk capital and institutional funds.)
The narrative day in and day out in the financial media, especially from the U.S.-based news outlets, is that Europe is still mired in the Great Recession.
Yes, Greece and Spain have high rates of unemployment, and economic activity overall is just now back to 2008 levels. But there’s growing evidence of a very real, very dramatic estate boom.
We saw it earlier this month as we drove into Paris, where there are construction cranes from the north to the south. La Défense, the financial hub just west of the tourist areas is so hot the Wall Street Journal dedicated a front-page story earlier this month all the projects there, including three skyscrapers – each 30-plus floors – due to open by 2020.
That’s just Paris.
As we’ve reported over and over, there are billions of euros worth of retail real estate projects across Europe. What we haven’t told you is there are also billions of urban mix-used projects in various stages of completion. All this is mostly due to the fact it’s tough to put capital to work. In some European Union countries, zero interest rates mean banks are charging depositors rather than paying interest. Equity markets are still flat.
So what’s a big investor to do? Join public-private partnerships to finance big projects across a continent that has persistent housing shortages. For instance, more than half of Europeans between 18 years old and 34 years old live with their families – 66 percent in Italy, 58 percent in in Portugal, 55 percent in Spain and 74 percent in Slovakia, according to State of the Housing in the EU 2015.
BIGGEST RESIDENTIAL PROJECT?
If there is a town in Europe right now (other than London) emblematic of a construction boom, it’s unsung Vienna, which gets precious little publicity compared to, say, Berlin. Vienna has the largest residential construction project on the continent in the form of Aspern Seestadt (Lake City), a gigantic lakeside development just outside the city. Well, it’s the largest we could find. (Check out our list of the largest projects across Europe at the end of this post.)
We queried Marvin Mitterwallner at Aspern Development AG in Vienna as to whether we’re accurate. “I don’t know if we are bigger than Fornebu in Norway,” Mitterwallner replied by email. Fornebu is a similar project outside Olso – mixed use on a former airport property, Mittenwallner wrote.
Unlike the Fornebu project, which appears stalled, the Aspern project is moving ahead rapidly, in no small part due to Vienna’s rapid growth. Just last year, Vienna added about 30,000 new residents, but only 7,200 new homes. Aspern Seestadt and Vienna overall have gotten – and keep getting – raves and publicity from urban development sites and eco-business advocates.
On the northeast side of Vienna, the Aspern project will redevelop an abandoned airport. Construction is under way, with about 6,000 people living in what is now designated as the 22nd District of Vienna … an entirely new district. By 2030,Aspern Seestadt is projected to have 8,500 units, with 20,000 residents living around an artificial lake. The district will be a 25-minute subway ride away from downtown Vienna (with its own new line) and a 28-minute train trip to the Slovakian capital of Bratislava, according to media reports
Never heard of it? Neither had we until our Nina Avramovic Trninic included it in a post about Austria spending billions to run a new metro line out to Seestadt.
Aspern Seestadt includes:
• an estimated investment totaling about 5 billion euros.
• transportation connections to the railway stations, airports of the “Twin Cities” Vienna and Bratislava.
• a new, multifunctional urban quarter with high-quality flats and “generously sized” spaces for offices, production companies and service providers, science, research and schools.
• 240 hectares, roughly corresponding to 340 soccer pitches or the combined surface of the 7th and 8th municipal districts of Vienna.
• new buildings with a planned gross floor area in excess of 2.2 million meters squared.
• more than 20,000 residents and 20,000 workplaces by 2028.
The official website has a lot of interesting interactive elements that show you Aspern Seestadt’s relationship with Vienna, as well as the physical layout and updates about new companies moving in.
Aspern Seestadt is one of two headline-generating major mixed-use projects in Europe going on nearly simultaneously. The other is in Germany.
HAFEN CITY WILL ADD 40-PERCENT TO HAMBURG’S CITY CENTER
The largest mixed-use development we could find that’s happening is HafenCity, an 8 billion euro project to revive Hamburg’s waterfront. The public-private partnership is an unimaginably large project. Unlike Aspern Seestadt, which is aimed at the middle class, HafenCity is bringing to Hamburg luxury apartments with Manhattan-style price tags.
Apartments in the Elbphilharmonie, a 26-story mixed-use development that includes a concert hall, range in size from 120 meters2 to 400 meters2, or about 1,300 square feet to 4,300 square feet. When the building opens next year, they’ll cost – are you sitting down? – from 6.5 million euros ($7.2 million) to 11 million euros, or just over $12 million, according to the New York Times. About half have been sold!
The entire HafenCity project, which began in earnest back in 2001, will cover 160 hectares, and developers claim it will increase the size of Hamburg’s city center by 40 percent. About 97 percent of the land is owned by the city of Hamburg, according to the HafenCity website.
Here are some of the numbers for the entire project from the HafenCity website:
• Overall area: 157 ha of former port and industrial land
• Land area: 127 ha
• Expansion of Hamburg City by 40 percent
• 10.5 km dockside promenade / 3.1 km Elbe embankment
• 6,500–7,000 homes (approx. 1,500–2,000 subsidized) for approx. 13,000–14,000 residents
• Building density: 3.7–5.6 floor space index (FSI)
• Residential density: 110/ha (land area)
• Employee density: 354/ha (land area)
• 57 projects completed; 53 projects under construction or planned
• Investment volume: private investment – around 8.5 billion euros; public investment – 2.4 billion euros, mostly financed from special assets fund sales of plots in HafenCity (around 1.5 billion euros).
Now THAT’s a project.
What else is going on:
• Hertsmere House in London is planned as Europe’s largest residential tower, and appears to be a mostly private effort. New York–based architecture firm HOK received approval earlier this year to build the 67-floor, 789-foot skyscraper in London’s West India Quay neighborhood. Hertsmere House will be near Canary Wharf business district. It looks like the project has jumped through most of the regulatory hoops, but we can’t find an estimated value for the building.
• Nordhavnen in Copenhagen started construction in 2009 but is still in the earliest stages of development. The goal is to – over the next 50 years – convert a large section of Copenhagen’s port into a collection of inviting urban neighborhoods, with as many as 40,000 residents.The Nordhavnen vision is a community built on a “five-minute principal,” where it will take no more than five minutes for residents to reach schools, daycare facilities, groceries and the metro. This is another big public-private projected planned over the next decade. It is 95-percent owned by Copenhagen government and 5 percent by the Danish government. Private contractors are slated to build what’s billed as a 200-hectare “Sustainable City of the Future” through 2025. Nordhavnen overlooks the Oresund Strait separating Denmark from Sweden.
• Earlier this year, we wrote about Europa City. From our post: The project is planned as an almost self-contained city, with cultural/arts/museums, leisure, restaurants and retail, hotels and urban parks, according to the EuropaCity news release from earlier this year. Plans include 25 acres of leisure spaces, including a theme park, 12 acres of cultural space, parks and sports venues to retail, hotels and restaurants spread out over 200 acres just southwest of Paris Charles de Gaulle Airport. There are plans for a 2-acre water park, as well as an urban farm. And all this will be just 10 kilometers from the center of Paris. In March, Dalian, China-based Dalian Wanda Group. Dalian Wanda announced it will invest $3.3 billion through 2024 in EuropaCity.