Germany’s residential market powers ahead amid eurozone crisis

Germany’s residential market is booming. As volatility in the eurozone reaches near-breaking point, investors are turning to Germany’s residential sector as a safe haven.

In the year to 15 November, there were 68 residential portfolio deals involving portfolios of 250 units and above, a jump of 66% on last year’s figure, according to Cushman & Wakefield. Around 74,000 units were traded in the period with a combined value of EUR3.9bn, according to C&W. ‘If another large sale goes through before the year-end, this figure could be pushed up to EUR 5.5bn,’ Matthias Franz, an associate in C&W’s capital markets group in Frankfurt, told PropertyEU.

And according to Malte Maurer, head of residential development at Jones Lang LaSalle in Germany, supply is significantly outstripping demand: ‘There is more interest in residential portfolios because big institutional investors have got quite a lot of money and they prefer to invest it in larger portfolios if they can because it's easier than buying a lot of single assets. I could sell 20 residential portfolios of between EUR20mln and EUR70mln right now if I had them,’ he told PropertyEU.

Residential assets have caught the eye of investors due to their stability and good cash-flow, according to Franz of C&W. ‘Both core investors and opportunistic investors are looking. Last year, a deal might have attracted five investors. Now, it could be more than 10 investors,’ he said.

And there are some sizeable portfolios up for grabs, including Landesbank Baden-Württemberg’s (LBBW) portfolio of 21,500 residential units in the region, which it put up for sale in July for around EUR1.3bn. However, analysts say the sale is unlikely to go through this year unless LBBW lowers the price.

LBBW is believed to have received two bids of around EUR1.25bn from Deutsche Wohnen and Patrizia Immobilien. Deutsche Wohnen has since exited the process, which suggests that Patrizia Immobilien may be the front-runner for the portfolio. A spokesman for Patrizia Immobilien declined to comment on whether the company had bid for the LBBW portfolio.

The full story appears in the December issue of PropertyEU. Click on the following link to subscribe