Press Release NAI apollo: Residential portfolio market in Germany starts 2025 with a positive result

NAI apollo: Residential portfolio market in Germany starts 2025 with a positive result

• Market for residential portfolios in Germany defies economic uncertainty with total investments of €2.3 billion in the first quarter of 2025
• Following a rise in purchase and sales volumes, Open-Ended Funds and Special Funds represent the second strongest buyer as well as the dominant seller group ahead of Project Developers and Contractors
• Increase in portfolio trading in the mid-price segment; decrease in the category below €10 million
• Outlook for 2025: General conditions remain challenging. Portfolio streamlining of properties in need of refurbishment, fire sales and resilience of the residential property markets are boosting transaction activity, however. A dynamic start to the year and increased investment interest on the part of institutional market players indicate that the €10 billion mark will be exceeded, as was most recently the case in 2022.

Frankfurt am Main, 7th April 2025 – The market for residential portfolio transactions (30 residential units or more) in Germany has gained significant momentum compared to the first three months of 2023 and 2024. According to an analysis by NAI apollo, a partner of NAI Partners Germany, the investment volume totalled €2.3 billion in the first quarter of 2025. “Although this is below the figure for the final quarter of 2024, it is significantly better than the €790 million achieved in the first quarter of 2024 and is also 16.2 % above the volume for the first quarter of 2023. However, it remains well below the average for the previous five first quarters of €4.6 billion. A major transaction with a volume of €750 million, according to press reports, and a market share of 32.7 % contributed significantly to this year’s Q1 result. This deal involved the acquisition of 8,000 residential and commercial units from the Open-Ended Fund UniImmo: Wohnen ZBI by In-West Partners, on behalf of Elliott Investment Management according to market information. It also represents the largest transaction during a first quarter in the last three years,” said Dr Konrad Kanzler, Head of Research at NAI apollo.

“In view of the stabilisation and resilience of the German residential markets, foreign capital from institutional investors in particular is also returning to the market. Recently, existing properties from the value-add and opportunistic segments have once again become more of a focus for investors. However, low-risk assets from the new-building segment, such as project developments with state-subsidised housing, also remain of interest to investors with a strong equity base. In addition to Private-Equity Funds and Opportunity Funds as well as Open-Ended Funds and Special Funds, the Public Sector continues to play an active role,” said Dr Marcel Crommen, Managing Director of NAI apollo. “User and investor demand remains high particularly in the metropolises and their surrounding areas. As a result, property prices in growth regions remain largely stable or show moderate increases, while prices for properties in less attractive locations and with a low energy efficiency class continue to fall,” added Stefan Mergen, Managing Partner of apollo valuation & research GmbH.

Private-Equity Funds and Opportunity Funds form strongest buyer group, Open-Ended Funds and Special Funds stand out with high market activity and dominance on the seller side

In the first quarter of 2025, the group comprising Private-Equity Funds and Opportunity Funds gained significantly in importance, taking advantage of at times favourable market expansion opportunities. Including the aforementioned €750 million deal, these funds have acquired residential portfolios worth a total of €917 million (Q1 2024: no significant market activity), putting them in first place in the investor ranking. “However, other institutional investors have also increased their activities. For example, Open-Ended Funds and Special Funds took second place on the buyer side with investments of €359 million. A year ago, they acquired portfolios worth just €51 million,” said Kanzler. The Public Sector follows in third place with a total volume of €339 million (compared to Q1 2024: +53.9 %). This sector focuses primarily on the acquisition of project developments, which account for over 65 % of its purchase volume. In total, €511 million was generated from trading in project developments in the first three months of 2025, an increase of 9.7 % compared to the previous year, although the market share has decreased from almost 60 % to 22.3 %.

“On the seller side, the group comprising Project Developers and Contractors came in second place with a share of 27.9 % or €640 million, in line with the reduced market significance of project sales at the start of 2025,” said Mergen. The dominant sellers are the Open-Ended Funds and Special Funds, whose good result (volume: €1.1 billion / share of sales: 45.9 %) is primarily based on sales from the UniImmo: Wohnen ZBI property fund.

Mid-priced categories see robust sales growth; €500 million-plus segment accounts for largest market share

“In total, over 17,400 units were traded in the past three months, which represents a fourfold increase from the previous year’s figure. The number of registered transactions has also increased by over 70 % compared to the start of 2024, primarily owing to the high level of market activity by Open-Ended Funds and Special Funds,” said Kanzler.

The first quarter of 2025 was not only driven by the market’s biggest deal and the related improved performance of the €500 million-plus category (market share: 32.7 %). The two price size categories of “€25m to €50m” and “€50m to €100m” also saw a more than five-fold increase in the Q1 2025 result compared to the previous year. In total, this signifies a transaction volume of €923 million or a share of 40.3 % (Q1 2024: €177 million / 22.5 %). The majority of properties in this category were core and core plus properties. “By contrast, declines of 54 % and around 19 % were registered in the “sub-€10m” and “€100m to €500m” price categories, which totalled €333 million,” said Mergen.

Significant increases from both German and foreign investors

Looking at the nationalities of investors, there is a clear year-on-year increase in German residential portfolio market investments by both foreign and domestic investors. Excluding the biggest deal, the increase is around 100 % in each case compared to Q1 2024, meaning that German investor groups have invested just under €1.1 billion and foreign companies almost €0.5 billion. If the €750 million deal is included in the calculation for foreign investments, the volume increases accordingly to over €1.2 billion, which corresponds to a market share of 54.3 %.

Positive forecast despite difficult conditions

Despite the ongoing economic uncertainty and the current political decisions regarding the expansion of government debt, which are highly likely to have an impact on inflation and interest rates, there will still be investment opportunities in the resilient residential portfolio transaction market in 2025. “As part of the new German government’s future investment programme, long-term capital market interest rates are expected to rise further, which in turn will lead to an increase in construction interest rates and property yields. This has already happened in some cases. Accordingly, fire sales are likely to increase further, partly owing to upcoming refinancing. At the same time, rising interest rates are likely to have a counterproductive effect on new residential construction,” said Crommen. “The increased market momentum at the start of the year and the undiminished investment interest on the part of institutional market players indicate that the €10 billion mark, which was last reached in 2022, will be exceeded. Expected portfolio sales, especially of distressed assets, and the re-entry of foreign investors enable us to make an optimistic forecast for 2025," added Mergen.