This is the second highest investment volume of any quarter in the market cycle to date and a year-on-year increase of 168% on Q1 2019. However, Ado Properties’ acquisition of Adler Real Estate, with more than 58,000 apartments, contributed significantly to this record volume.  

Karsten Nemecek, Managing Director Corporate Finance – Valuation at Savills Germany, says: “We have seen further consolidation among the large residential property companies and therefore expect opportunities for acquisitions of very large portfolios to become more scarce. We have noticed for some time that the large portfolio holders are increasingly buying developers. In doing so, they also acquire a developer’s pipeline, securing a long-term inflow of new apartments.” Examples of such takeovers include the acquisitions of Isaria Wohnbau by Deutsche Wohnen and Bien-Ries by Vonovia.

Matti Schenk, Associate Research for Savills Germany, adds: “We can currently only assess the effects of the lockdown on the rental markets to a limited degree. However, we may well see a reduction in rents, particularly at the high-end, since many occupiers are likely to be more price-sensitive than before the outbreak of the pandemic. The sale process for high-end new buildings in particular are, therefore, likely to be delayed.”

It is doubtful whether the COVID-19 pandemic will result in long-term rental declines. In most German cities, vacancy rates remain extremely low and this year's new-build volume may well be significantly lower than expected.

Nemecek adds: “Overall, we expect the multi-family market to be less affected than most other real estate sectors. The comparatively high level of rental stability could even mean that institutional investors may wish to increase their portfolio allocations to residential property after or even during the crisis. Hence, demand in the investment market may increase, which could intensify bidding processes, particularly for portfolios of existing property.”