German resi portfolio market hits 14-year low in Q1 2024

Turnover in Germany’s residential portfolio market was at its lowest level for 14 years in the first quarter of this year.

Research by Frankfurt-headquartered NAI Apollo revealed that about €790 million-worth of property changed hands which can be compared to the €2 billion of the corresponding quarter of the previous year, an approximately 60% fall, and about half of what was a very weak quarterly average of €1.6 billion in 2023.

“The investment mood in the German residential portfolio market remains subdued at the beginning of 2024. The ongoing mix of slightly lower but still high financing costs, strict lending conditions and ever-decreasing economic prospects are causing market participants to remain cautious,” said Dr. Marcel Crommen, managing director of NAI Apollo.

“Only the public sector made a positive impression with higher purchasing activities.”

Crommen said that investment strategies focused on securing liquidity and strengthening portfolio resilience and that the repricing phase is not yet complete.

He said that around 4,300 units were traded in the past three months, a decline of around 44% compared to the previous year.

“Larger transactions remained the exception. There was higher market activity in the small-volume segment. The buyers there continued to be primarily investors with strong equity capital,” said NAI Apollo head of research Dr Konrad Kanzler.

About 80% of all deals were small deals up to €25 million and the volume traded in this category increased 30.2% to over €250 million its share of investment volume increased from 9.9% in Q1 2023 to 32.3%. The largest market share, around 45%, is in the €100 to €500 million category which attracted only €360 million, corresponding to a decrease of 74% compared to Q1 2023.

Developments comprised more than 59% of the market, increasing by 27.3 percentage points. “Foreign capital and public sector purchases have made important contributions to this,” said Stefan Mergen, managing partner of Apollo valuation and research.

“In absolute terms, however, there have also been declines in the new construction segment. Compared to the same quarter last year, the traded volume fell from around €630 million to around €470 million.”

The largest transaction so far this year was Greystar’s acquisition of Greenpark in Berlin (CGI pictured above) from Bauwens. The project will provide 758 residential units which are scheduled for completion in 2026.