NAI apollo real estate: Residential portfolio sales in Germany exceed previous year's level

• Transaction volume of €6.1 billion surpasses year-ago level, but falls short of 2015 record figure
• Increase in large deals above €100 million
• Listed property companies and REITs become most active buyers again
• Rise in average price caused by high sales prices for larger purchases, continuing price increases and a high number of sales in project developments

Frankfurt am Main, 06.07.2017 – According to the latest analysis by owner-managed real estate consultancy NAI apollo real estate – a partner of the NAI apollo group – the market for residential portfolio transactions in Germany appeared more subdued in the second quarter of 2017, with a transaction volume of €2.4 billion. The total volume in the first half of the year amounted to approximately €6.1 billion. This represents an increase of 32.6 % compared to the first half of the previous year (H1 2016: €4.6 billion). However, it still lies far short of the record half-year volume of €17.2 billion achieved in 2015.

Compared to 2016, a higher number of residential units changed hands in the first half of the year, increasing to 49,600 (H1 2016: 47,200 units). The number of transactions also increased to 178 (H1 2016: 169). "One noticeable development this year is the return to the market of more large transactions above €100 million. Transactions between €100 million and €500 million accounted for the largest share of the overall volume in the first six months, at 32.2 %. Their volume more than doubled from €0.8 billion in the first half of 2016 to €2 billion in 2017," said Dr. Konrad Kanzler, Head of Research at NAI apollo group.

In addition, in contrast to the first half of 2016, a transaction above €500 million again took place this year after Deutsche Wohnen acquired a Berlin portfolio in the first quarter.

Listed property companies and REITs regain top position among investors

"After last year's strong showing by open-ended funds and special funds, listed property companies and REITs have strengthened their position again this year," said Stefan Mergen, managing partner of NAI apollo valuation & research GmbH. Compared to the first half of 2016 (€0.6 billion), these investors increased their transaction volume almost threefold to €1.7 billion (28.6 % share) and currently represent the most active group.

"Asset / fund managers" were next in line, raising their purchase volume by 62.5 % to more than €1.3 billion (21.3 % share). "Open-ended funds / special funds" remained in third place, and increased their investment volume by 18.2 % compared to the first half of 2016 to almost €1.3 billion (21.1 % share).

In terms of the nationalities of different buyers, German investors increased their dominance of the domestic residential portfolio market compared to the first half of last year with a share of 81.6 %. This corresponds to an investment volume of €5.0 billion (H1 2016: 73.8 % share and €3.4 billion). In contrast, international investors lost a little ground, investing €1.1 billion in the first half of 2017 (H1 2016: €1.2 billion).

"Deutsche Wohnen was responsible for the biggest purchase in the year to date, acquiring a residential portfolio with a commercial share comprising 4,170 units in Berlin for around €655 million. The second-largest deal concerned the starting portfolio of special fund Industria Wohnen Deutschland V including 635 residential and commercial units in Berlin, Cologne, Wuppertal and Mainz. This portfolio of five project developments was acquired in a forward deal for approximately €226 million," said Dr. Konrad Kanzler.

Transaction volume in 2017 could become second best result after 2015

Based on all transactions, the price for a residential unit stood at around €123,000 in the first half of 2017. This represents an increase of 26.2 % compared to the previous year (H1 2016: €97,500/unit). "The high prices paid for large transactions made an important contribution here. In addition, prices are continuing to rise across all construction year categories. It is also important to note the increasing importance of project developments that are traded in the form of forward deals and affect price levels," said Stefan Mergen.

Based on the good performance in the first half of the year as well as the slight increase in the number of large deals and the continuing strong demand for residential property investments, NAI apollo real estate is forecasting a transaction volume of more than €15 billion for 2017 as a whole. If this forecast turns out to be correct, the transaction volume would be higher compared to all previous years except the record year of 2015. At the same time, the real estate consultancy expects prices for existing properties to increase again as well as further sales in project developments, which will also have an effect on investment results.