The concept of Schadenfreude is not something that only Germans understand. The British are also familiar with the secret feeling of triumph you derive from someone else’s misfortune. But it is Germany’s Frankfurt am Main that is enjoying the greatest feeling of Schadenfreude right now, not Great Britain. In Frankfurt, the precise details of Theresa May’s announcements of a “hard” Brexit are being followed closely. The first bankers, insurers and asset managers in London will already be sitting on packed suitcases. And what Britain loses when it exits the European Union could soon be Frankfurt’s gains.
But let’s start at the beginning. If they want to offer a full range of financial services across the EU, international banks and insurers need to have a so-called “passport”. This requires a headquarters in one of the EU’s member states and compliance with EU regulations and legislation. U.S. banks in particular, along with many Asian financial institutions, have long regarded London as their first port of call in the EU. Even before May’s Brexit plans were announced, a large number of institutions had already concluded that there would be little chance of maintaining their full passporting rights once the UK leaves the EU. They are already preparing to move jobs to other locations within the EU.
The Swiss investment bank, UBS, one of the world’s largest financial services companies, is one of the first out of the starting blocks. The bank announced in December that it would be moving 20-30 percent of its 5,000 London-based jobs to Frankfurt. Competitors such as Luxembourg or Paris, that had been touted as equally likely destinations, ended up empty-handed. It is likely that others will follow the example set by UBS. According to an EY survey of international real estate experts, more than 70 percent of respondents expect Frankfurt to reap the biggest benefits if London is toppled as Europe’s leading financial center. A majority of those surveyed believe that this will lead to increases in both transaction volumes and rental prices.
There are a number of factors in Frankfurt’s favor. This major financial center is not just an important motor within the European banking sector, it also has Europe’s third-largest airport and the world’s seventh-largest train station, which makes “Mainhattan” one of the continent’s key transport hubs, and one of Germany’s most international cities. This puts Frankfurt clearly ahead of Milan or Paris. One of the biggest beneficiaries will be Frankfurt’s real estate market; 86 percent of the industry experts surveyed by EY predict that prices will rise for condominiums and apartment buildings in Frankfurt.
Many already regard Frankfurt as Europe’s top financial center. In its 2017 “Emerging Trends in Real Estate” study, pwc rates London’s real estate market as low as 27th of the 30 cities analyzed. In contrast, Frankfurt am Main ranks third in Europe, which represents a sensational surge up the rankings in comparison to the previous year’s result, when Frankfurt was ranked 14th. And with every company that follows the example set by UBS, Frankfurt’s attractiveness is given a further boost. The joyful anticipation of Frankfurt’s real estate industry is certainly justified.