Transaction volume Q3 2024: Further revival of Germany’s residential real estate transaction market
At € 1.7 billion, the German residential real estate market recorded a significantly higher transaction volume in the third quarter of 2024 than in the same quarter of the previous year. In addition to family offices, private equity investors and municipalities, institutional investors are increasingly returning to the market. Falling interest rates and rising rents are creating an attractive investment environment.
• Transaction volume of € 1.7 bn represents a significant year-on-year increase
• Besides core investments, the spotlight is increasingly shifting to value-add properties (manage to green)
• High level of interest in the acquisition of project developments
• Focus on major cities
• Prime yields around 3 %
The German residential real estate market is reporting positive growth. In the third quarter of 2024, the transaction volume in the German residential real estate investment market reached € 1.7 billion (Q3 2023: € 1.1 bn). “We are seeing a persistent revival, residential property has bottomed out. Besides family offices, private equity and local authorities, institutional investors are now slowly returning. The interest rate steps taken by the Fed and the ECB are the main factors having a positive impact”, says Mark Holz, Head of Research at Lübke Kelber. “The combination of rising rents and a more relaxed finance environment is making property transactions more attractive again in the eyes of many investors”, Holz adds.
Increased activity in major cities
Transaction activity was especially lively in tier-1 markets such as Berlin, Munich and Hamburg. Around 50 percent of the total investment volume was attributable to these markets. The Prime segment saw transactions in Berlin and Munich at multiples of just over 30x. The largest deals included the purchase of the Munich residential building “Wohnen am Nockherberg” by Quantum Capital Partners with a gross initial return of 3.1 percent and the acquisition of a Berlin portfolio by Bauconcept at an initial yield of 3.2 percent – both on behalf of family offices. “These transactions demonstrate the relevance of equity-heavy investors in the German market,” Holz comments.
The majority of the deals concluded were forward deals or relatively new stock, which are in particular demand thanks to their ESG compliance. After forward deals had receded into the background in past quarters, the increase in this area points to growing confidence in project developments as well as an adjustment of price levels.
High level of interest in the acquisition of project developments
There is growing interest in the acquisition of project developments as well as minority or majority stakes in such developemnts. In the third quarter, several major projects were acquired, among them 420 residential units by Arrow und Red Square from the insolvency estate of Mikare. The “Nikolai District” in Hamburg was handed over by OFB and Propcom to Bilton Holding, which is planning, among other things, to build 100 residential units there. Institutional investors are also increasingly investing in residential projects. For example, Brookfield financed an unspecified percentage of the Cologne project “Die Welle”, which is being developed by Empira in order to realise a total of 752 residential units by 2027. Similarly, HanseMerkur took a 50 percent stake in the Hamburg “Johann Kontor” development which will include the creation of 146 apartments.
Value-add increasingly sought after
A further feature of the market is the growing relevance of value-add transactions, particularly with regard to properties from the 1960s to the 1980s. Besides major transactions such as the Rhein-Main portfolio sold by Vonovia and Empira’s residential portfolio sale, this also includes transactions by local players. With around 4,000 residential units, this category accounts for nearly 60% of the market. As a response to the current investor demand, value-add, manage-to-green approaches as well as extensions and densification are of great importance.
In the third quarter, Lübke Kelber registered a total of seven transactions with a volume of more than € 50 million, the largest of which was the purchase of 1,970 residential units in the Frankfurt area for € 300 million by N17. The pending sale of 10,000 apartments by ZBI to ZAR for 480 million is not yet reflected in the quarterly figures; otherwise the quarterly volume would exceed € 2 billion. In the third quarter, the average square metre price of all registered transactions stood at € 3,779, a rise of 19 percent over the previous quarter due, essentially to the high transaction activity in major cities.
Methodology
Our analysis includes all residentially used properties with at least 20 residential units in which commercial usage only plays a minor role. Additionally, the analysis takes no account of pure M&A transactions, entity deals or minority shareholdings. Special residential forms such as student accommodation or retirement homes are also not taken into consideration.