UK property investors have yet to enjoy the lion’s share of growth in the German property market, according to latest European property research published today by Scottish Widows Investment Partnership (SWIP).

SWIP suggests future growth is set to be driven by continuation of the national economic revival and diverse occupier demand.

Frankfurt saw the largest total returns in the German office property market last year with returns reaching 32% - their highest level since 1989. Growth in the business and financial sectors boosted take-up rates for Frankfurt office property by 14% between 2005 and 2006.

Looking forward, SWIP expects investors will flock to Hamburg over the next five years, where total returns of around 9% are forecast over the next few years. Elsewhere in Germany, SWIP believes that Cologne is a strong investment bet, alongside the traditional German office property markets of Frankfurt, Hamburg, Berlin, Munich and Düsseldorf.

Robert Matthews, head of international property at SWIP, said: ‘The German economy has really turned a corner now and we are seeing definite signs of a cyclical upturn underpinned by strong export demand and a number of structural reforms.

‘This acceleration in growth is stimulating increased demand for all types of real estate putting upwards pressure on values. We’re seeing the start of a three to four year cycle starting now which will see the German market gain confidence.’