Ready businesses, investment projects, and land in Germany, Austria

Income and commercial real estate in Germany, Austria

The rush is over for the Berlin residential real estate investment market. The rent control bill passed by the Senate in October has further increased uncertainty among investors, especially international investors. According to a recent survey conducted in Germany among about a hundred industry players, many changes have been made to their long-term business strategies. This includes shifting to other asset classes or markets, and/or temporarily halting investments.
If the Berlin Senate does decide on rent control in the first quarter of 2020, it will have a huge impact on the market. A sharp drop in prices is expected. An Austrian real estate investment group expanded its activities beyond Berlin, partly due to recent regulatory changes. Already at the beginning of 2014, due to significant price increases in the German capital and after selling its portfolio there, the company began acquiring multi-family houses in Leipzig. The next step was Dresden.
After the two Saxon metropolises also became more expensive over the past three years, the group of domestic investors moved down a level (to Eastern Germany), namely: Magdeburg, Erfurt, and Chemnitz. “The strategy is the same as in Berlin: we build a portfolio of houses, hold it for about two years, and then sell it again,” says the investor. At the same time, two or three years ago they began creating a portfolio of condominiums. The reason: they can often be bought at significantly lower prices than multi-family houses in the same locations.
In fact, much can be said about investments in individual markets in the new federal states – primarily about more attractive prices and yields. While the average price per square meter in Berlin is about 3000 euros, in Leipzig and Dresden it is no more than 2400 and 2500 euros, respectively. The average yield in Berlin is around 2.5 percent (without capitalization) and up to 3.5 to 4 percent in Leipzig and Dresden. Moreover, unlike the western region of Germany, most houses have been renovated. This is based on extensive financing that went into the new federal states after the fall of the Berlin Wall.

Investing in Germany: Why the Location of Small Towns is Important for Investment?

Eastern German real estate markets have something to offer – competition has intensified. Another large group of investors who started investing in Berlin in 2005 has also moved to secondary cities in Eastern Germany, which was timely. Today they own real estate in Leipzig, Magdeburg, Halle, Erfurt, and Rostock. The Thuringian capital – Erfurt – was added to the list of investment cities only in early 2018. Today, the company already owns more than 30 real estate properties, as well as several commercial properties in addition to residential buildings.
As nice as it is that there are still not many other investors in small towns and that sellers still have enough time to inspect real estate, good relationships are very important. Over the years, a well-functioning brokerage network has been established in Eastern Germany, and more than a thousand broker contacts have been registered in Investmakler’s database. Another necessity when investing in B and C class cities: focusing on the location. Because the smaller the city, the more important its location.
Where is the caravan heading? To cities like Magdeburg, Erfurt, and Chemnitz? “Zwickau has around a hundred thousand residents, is a major VW plant, and is home to universities of applied sciences,” say experienced investors. In cities like Gera and Görlitz, houses can sometimes be acquired with yields of up to nine percent, but they usually come with the need for renovation.
After property prices in Berlin gradually increased over the past few years, and the regulatory environment has also tightened, more and more Eastern German cities with positive economic and demographic changes have come into focus for investors. As real estate prices in Eastern metropolises such as Leipzig and Dresden have risen, more investors in second and third-tier cities such as Magdeburg, Erfurt, Chemnitz, Halle, and Rostock are looking for interesting opportunities.

Where to Invest in Germany: Commercial Real Estate as an Investment Object

Private investors are investing in commercial real estate. In search of new investment opportunities, they are increasingly investing in the commercial real estate sector.
In the past, our clients mostly invested in income-generating properties, but the situation has since changed. “For several years, there has been a rise in private interest in commercial real estate,” report experts from Investmakler. They refer to the lack of alternatives in the cash market and its relatively good predictability as reasons: “Commercial real estate is a reliable source of income because, like residential properties, it has a stable rental income.” And often with better yields. The yield of about five percent is the ceiling for residential properties, whereas it currently often amounts to around three percent.
In the field of medium-sized investments (from 10 to 20 million euros), many private funds are involved. Often, the number of successful mid-sized entrepreneurs is less than ten million. Almost the entire range of commercial real estate is in demand, with a focus on office and retail properties, but specialized objects in areas such as healthcare and even parking garages are also in demand. The topics of hotels, serviced apartments, and dormitories are also very popular in their circles.
Increased interest is observed as the market for small commercial properties has become more visible. “Real estate consulting companies now have a fairly good overview of demand, supply, and prices. Additionally, print media are also paying more attention to this topic,” say some experts. Here are two main reasons for such investments: income and asset preservation.
Regardless of which property is ultimately invested in, all private investors have one common feature, experts say in unison – regional connections or close ties with a specific sector of the economy. Private investors often prefer regions or industries they know personally. That’s why they are usually remarkably well-informed.

Investing in Commercial Real Estate – Shopping Center in Germany: Management Company or Administrator?

The administrative sphere is also one of the blind spots for private investors. As with residential real estate, the management of commercial real estate is usually outsourced to a third party. Investors often forget that this usually only involves pure administration and not actual management, such as targeted tenant selection, for example. The more complex and larger such a property, such as a shopping center, the more likely you need a professional management company rather than just administration.
In the case of specialized markets, retail properties, small office buildings, or specialized properties in the healthcare sector, higher yields are currently observed compared to residential real estate. The entry threshold, which is two to three million euros, is hardly higher than for investments in a classic residential property, and the supply is larger.
Our company will help you find a good investment property, and if you wish, can also take over its full management.