NAI apollo: Investment market for residential portfolio off to a positive start in 2019 despite decline in take-up
Acquisition of Akelius portfolio the sole purchase over €500 million
The good result at the beginning of the year was primarily due to the acquisition of the Akelius portfolio with 2,839 residential units by Deutsche Wohnen as well as multiple transactions in the price segment between €100 million and €500 million with a total volume of nearly €1.6 billion. “The megadeal with a purchase price of around €685 million was the only transaction in the price segment above €500 million. Both size categories together comprise around €2.3 billion and, with a share of 58.8%, represent more than half of the market volume,” explains Dr Konrad Kanzler, Head of Research at the NAI apollo group. The share of turnover generated by the segments “below €100 million” varies between 4.6% and 16.2%. Together, they equal an absolute volume of nearly €1.6 billion.
Average price increases due to general price rise and project sales
The familiar increase in purchase prices continued in 2019 for existing properties as well as for forward deals. With a market share of around 30% or €1.2 billion, it is primarily the large number of new housing developments sold before or during the construction phase which is reflected in the general price development and which contributes to the stable development of the transaction volume. Thus, the average purchase price per apartment increased to almost €157,000 per residential unit. This represents an increase of nearly €14,000 per unit when compared to the first three months of 2018.
Major acquisitions by the “public administration and local authorities” investor group
The market activities by public administrations or local authorities have been particularly noticeable over the first three months of the year. These entities increased their acquisition volume from €207 million in the first quarter of 2018 to almost €890 million in the past three months, which means they make up the second strongest group of buyers with a market share of 23%. Worthy of special mention is the state of Bremen, which has acquired the 50% share held by the Sparkasse savings bank in the Brebau housing association (with a total of nearly 6,000 residential units). Mention should also be made of the acquisition by the state of Berlin of more than 1,800 apartments owned by Schönefeld Wohnen GmbH & Co. KG in the Altglienicke district of Berlin. “This clearly demonstrates what, among other things, is expected from the local authorities: socio-political commitment, in particular when it comes to securing the provision of housing below the market level,” states Stefan Mergen, Managing Partner at NAI apollo valuation & research GmbH. However, the top investor group is still the “listed property companies and REITs”, mainly due to the acquisition of the Akelius portfolio by Deutsche Wohnen. An investment volume of €990 million, equalling a share of 25.7%, can be attributed to this group of investors. However, the absence of a deal on the scale of last year’s BUWOG acquisition means that this group suffered a decline of nearly 67% compared to the previous year.
On the sellers’ side, project developers are most prominent thanks to the increased market significance of forward deals with 44.2% of sales. This corresponds to an absolute take-up of €1.7 billion and an increase of 19.6% compared to the previous year. They are followed by real estate companies with a share of 36.4% or around €1.4 billion.
German investors increase market share slightly; international investors see declines
The share of German investors in the purchase price volume increased marginally compared to the same period of the previous year from 83.5% to 84.8%. However, the transaction volume dropped from around €5.7 billion to approximately €3.3 billion. Correspondingly, international investors recorded an absolute decline from €1.1 billion to a current €590 million, which means that their market share drops by 1.3 percentage points to 15.2%.
When comparing the federal states, the largest shares (by number of transactions) were attributable, as in previous years, to North Rhine-Westphalia (15.7%) and Berlin (13.5%). “German cities including Düsseldorf, Cologne, Berlin and Frankfurt remain the hotspots. As a result of the shortage of supply, investment properties in B and C locations are benefiting from continuing interest on the part of investors,” says Dr Konrad Kanzler. Cities in Hesse, Rhineland-Palatinate and Saxony (above all Dresden and Leipzig) are well represented among the secondary investment locations in the first quarter of 2019, as are cities in and around the Ruhr region (such as Solingen, Herne, Essen and Bochum). There was also a major deal completed in Bremen with the acquisition of Brebau.
Positive forecast due to expected major deals
The forecast for 2019 remains promising. This is primarily due to the sale of the BGP Group to the ZBI Group and Union Investment, which was completed at the beginning of the second quarter. The deal involves the change of ownership of 16,000 residential and commercial units in, among other locations, Berlin, Cologne, Düsseldorf, Münster and Kiel. “In addition, high-price project sales and large portfolio deals with prices exceeding the €100 million threshold will intensify market activities,” states Stefan Mergen. In light of this, NAI apollo expects that the take-up threshold of €15 billion will once again be exceeded by the end of the year.