London has dropped out of the top-10 real estate markets with the best prospects in the Urban Land Institute and PwC’s annual Emerging Trends in European Real Estate report.

The capital’s ranking has been falling over the last couple of years as rocketing values diminish the perceived scope for high returns. This year it stands in 15th place, one place behind Istanbul. 

However, Birmingham maintained its top-10 position in sixth position. 

According to the report, the five leading cities for investment prospects in 2016 are Berlin at the top spot, followed by Hamburg, Dublin, Madrid and Copenhagen.

The survey of real estate investors also found they were increasingly willing to consider alternative sectors. 

Some 41% of respondents said they would consider alternatives, such as healthcare, student accommodation and hotels, compared with 28% last year. 

Development was also popular, with 78% of respondents citing it as an attractive way to acquire prime assets.

“Investors are getting more creative in trying to access future prime assets at reasonable prices through more focus on alternatives and development,” said ULI Europe CEO Lisette van Doorn. “They take more risk on the short term to fulfil their long term objective for core assets.”

He added that the industry was having to think “less about bricks and mortar and more about service” and that this would have an impact on traditional business models. 

PwC director Gareth Lewis said: “Low interest rates, and the weight of capital bearing down on European real estate, mean that most remain bullish about the industry’s business prospects in 2016. 

“But they acknowledge that the global field for real estate is increasingly competitive, and if the current wall of capital recedes, there will be an even stronger focus on underlying market fundamentals, active asset management and operational skills.”