Dynamic trend of residential investment market ongoing
- Transaction volume of around €10.6 billion in the first half year
- Supply shortage fueling greater interest in property development, student accommodation and micro apartments
- Strong second half year expected – year-end transaction volume to significantly exceed the level of the past two years
In the first half of 2018, the transaction volume of residential portfolios upward of 50 residential units came in at €10.6 billion, up 45 percent compared with the same period in 2017. Even without Vonovia’s takeover of Buwog in the first quarter and the 70 percent participation of Adler Real Estate in Brack Capital, the investment volume allocated to ‘German resi’ stood at almost €7 billion, missing the good previous year’s result by a hair’s breadth. This is a conclusion drawn in a current analysis prepared by the global commercial real estate services company CBRE.
The only restriction braking the transaction market for residential portfolios is the lack of available portfolios.
More and more existing portfolios are finding their way to portfolio holders with a long-term horizon, which is exacerbating the supply shortage. Consequently, the interest in alternative investment opportunities on the residential real estate markets is on the rise. Former niche products, such as student accommodation and micro-apartments, as well as property developments are becoming increasingly important.
The acquisition of several micro-apartment developments worth around €670 million in the context of a forward deal by Corestate for a fund launched for Bayerische Versorgungskammer also features among the largest transactions, for instance. Overall, investment in student accommodation and micro-apartments accounted for some €1.6 billion, which is more than 15 percent (up €1.1 billion compared with H1 2017) of the investment volume allocated to the German residential investment market, while the funds invested in property developments amounted to more than €2.8 billion (up €800 million; share of 26 percent). “By the end of the year, we anticipate a transaction volume of around €17.5 billion for the entire residential investment market,” Lüttger predicts.
In the case of portfolios situated in Berlin’s city centre, individual residential privatizations function as an additional cash flow and are being increasingly considered by investors as an exit option.
Taken as an average of all portfolios traded, at €2,230 per sq m the €2,000 per sq m threshold was exceeded for the first time in this half year. Demand continuing to run at an uninterruptedly high-level, a dynamic rental price trend and a potential shortage of new housing projects due to land speculation are likely to push prices up further.
Residential portfolio transactions in Germany (upward of 50 residential units)
Source: CBRE Research, Q2 2018.
Market for residential portfolios in Germany
Source: CBRE Research, Q2 2018.
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