Nuremberg isn’t known as a significant real estate location even though it has been the economic and cultural centre of Northern Bavaria for years. But lower prices than in more prominent German cities, make buying property in Nuremberg a good investment.
The property market is growing steadily which can be seen in a renewed high level of real estate transaction volume in 2021. At EUR 1.39 billion, the sales volume was indeed about a tenth below the previous year’s figure, but it was still slightly above the average of the last five years. The top position was taken by the segment of institutional housing with a generated transaction volume of around EUR 525 million. The surpassing of last year’s figure by +6% is an indicator to a continuing interest in residential investments in Nuremberg.
The office segment showed a contradictory development in 2021 with only EUR 286 million or 61% less than the previous year due to a lack of opportunities. Since there were no large-volume sales (above EUR 100 million) observed the highest office transaction amounted to almost EUR 70 million for a forward deal in the Central Business District (CBD). The one product that went through the roof in 2021 was property for project developments. At around EUR 441 million, it achieved an extraordinary investment volume and raised its results from the previous year by +174%. Retail properties, as well as industrial and logistics real estate, were nearly insignificant to the growth of the property market with only around 8% of the 2021 transaction volume.
In 2021 the realized yields for office property were approximately 3.1%, thus a reduction of 20 basis points in comparison to last year. In the residential investment segment, there was a marked convergence of initial yields for new and existing properties with peak yields in new build projects at around 2.9%, similar to the previous year’s level (down the previous year’s level (minus 20 basis points) and in existing residential complexes at around 3.1%. For existing properties in particular, there was a further, significant decline in initial yields (minus 50 basis points). The hotel and retail segments, which were particularly affected by the pandemic, showed neither on the supply or demand side any particular activity on the market. In the few deals that could be observed, stagnation in initial yields was observed across the board.
For the first time in years, capital collection agencies such as open-ended and closed-end real estate funds weren’t the strongest buying force in 2021. The top position was claimed by project and property developers with a 43.1% share of the transaction volume. Direct investments by banks and insurance companies as well as purchases by owner-occupiers remained at a low level. Together, these buyer groups invested around EUR 58 million in the market, which corresponds to a market share of just under 4%, roughly the same as in the previous year.
Due to the corona pandemic and the uncertainty regarding the further development of the market, the Nuremberg investment market presented itself strongly in 2021, while only losing out marginally to the previous year. The market was driven by persistently high demand and the still too low supply of adequate, investable products. With the increase of project development properties and simultaneously project developers were potential for new and future areas created.
This article was written by Magdalena Szabo, a German apprentice studying Business Administration.