Empira Study: Where are residential real estate investments particularly sustainable?

Empira Study: Where are residential real estate investments particularly sustainable?

• Baden-Wuerttemberg the leader for sustainable residential real estate markets
• Top 7 locations divergent: Stuttgart and Frankfurt lead the way
• Small residential markets more sustainable than medium-sized ones
• Large cities remain sustainable investment targets despite high prices

Zug (Switzerland), 23. December 2019 - The Empira Group, a leading investment manager for institutional real estate investments in German-speaking Europe, has examined the sustainability of 60 major residential real estate markets in its latest study. Indicators that were analysed encompass socioeconomic and housing management parameters such as population and economic structure, the development of salaries/wages and employment levels, as well as vacancy rates and the dynamism of rents. In contrast to other studies, the assessment of the markets takes into account various dependencies, for instance on the manufacturing sector at the respective location. In the cluster consideration the Top 7 display the best performance by far, followed by the group of smaller locations ahead of the medium-sized markets.

"The motivation for our study was the major decline in yields and the increasing divergence between purchase prices and returns on rents in German cities - especially as there are increasing signs that the historically long boom cycle is coming to an end," comments Prof. Dr. Steffen Metzner, Head of Research at the Empira Group and the author of the study.

"Above all institutional investors increasingly have to examine precisely where and how they can invest in the residential real estate market. The investment horizons that we are talking about here are virtually exclusively very long term, and so the sustainability of the investments plays a key role. Against this background we recommend long-term investments in project developments for a company's own portfolio, develop-and-hold strategies therefore," adds Lahcen Knapp, CEO of the Empira Group.

Baden-Wuerttemberg performing strongly, North Rhine-Westphalia in part declining
At individual level Baden-Wuerttemberg is particularly strongly represented and accounts for the five most sustainable residential investment markets (the overall leader Ulm, as well as Karlsruhe, Heidelberg, Stuttgart, Freiburg), while four of the five locations with the lowest rating are in North Rhine-Westphalia (Kaiserslautern, Mönchengladbach, Oberhausen, Gelsenkirchen, Krefeld).

Within the Top 7 locations there is also a visible divergence between southern Germany and North Rhine-Westphalia. Stuttgart, Frankfurt and Munich are among the top ten cities in the ranking and are assessed as being relatively more sustainable than the other Top 7 locations - Hamburg, Berlin, Düsseldorf and Cologne - which are in the first and second third of the ranking, respectively.

Top 7 remain the most sustainable locations despite high purchase prices
Thus the largest markets rank among the most sustainable in Germany. All in all, five of the Top 7 cities are in the upper third of the ranking, six in the upper half. Moreover, five smaller towns and cities can lay claim to a place in the leading group of the ten most sustainable residential markets, whereas the ten markets with the lowest ratings are virtually all medium-sized locations.

"The Top 7 markets are able to underline their position as sustainable investment targets in the residential segment, while the performance of the medium-sized and smaller locations is, naturally enough, much more heterogeneous. Thus a two-pronged investment strategy is to be recommended with a base portfolio in the major cities, supplemented by selected secondary and tertiary markets," says Metzner.

The complete research report is available for download online on the Empira Group website at https://www.empira-invest.com/en/news.

About the Empira Group
With assets under management of approx. 1.7 billion euros, the Empira Group is one of the leading investment managers for institutional real estate investments in German-speaking Europe. The company specialises in the development of innovative and high-yield investment approaches and offers institutional investors in-house solutions in areas such as project development and land-banking. In the field of real estate debt funds, Empira is one of the leading providers in German-speaking Europe, offering both mezzanine and whole-loan products.

The real estate and capital market experts at the Empira Group cover the entire value creation process: from the identification of first-class investment opportunities with all property types, through ensuring a smooth acquisition process, to experienced asset management. The clients are institutional investors from Germany, Austria and Switzerland. The company has its headquarters in Zug (CH) with further offices in Luxembourg, Frankfurt, Munich and Leipzig.