10 / 2018

Development of real estate in Greater Munich

Development of real estate in Greater Munich

Transparent analysis ensures attractive real estate investments

When it comes to real estate investments, institutional and private investors prefer Germany's top seven cities (Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart). This is because market data for these cities has been available for years and serves as the basis for the decisions made in the world of finance and real estate. However, it should be noted that small and very small towns, as well as regions inside and outside the commuter belts surrounding the top seven cities, also offer high growth potential and thus attractive returns in different sectors and asset classes. The Munich Metropolitan Region, including the Greater Munich Region, is one such growth region. ehret+klein, a project developer and asset manager in Starnberg, has been concentrating on the Greater Munich Region for years. The second, updated edition of the Greater Munich Real Estate Market Report (2018/2019) was published in October 2018. The report, which comprises statistical data researched and collected by bulwiengesa AG, an independent analysis company, and supplemented with the project developer's wealth of experience, presents interesting findings and recommendations for attractive real estate investments in the Munich Metropolitan Region.

The Munich Metropolitan Region, including the Greater Munich Region, extends all the way around Munich, from Garmisch-Partenkirchen in the south to Ingolstadt in the north and from Dingolfing in the east to Augsburg in the west. Six million people live here, many of whom earn their living working for established global market leaders from industry and the service sector, university-based and private research and development centers, hip start-ups and in the creative media scene. The metropolitan region is extremely diverse. There is not only the Munich metropolitan area but also decentralized (county) towns and predominantly rural regions. Stable property prices offering good returns attract both national and international investors. The Greater Munich Region offers exceptional investment and development potential and is therefore also extremely attractive when it comes to real estate investments.

The Greater Munich Region offers exceptional investment and development potential

The motivation behind our own thorough research was the need for persuasive data for our own projects and for the launch of a real estate fund. The idea for a real estate fund in the Greater Munich Region was born after a number of professional investors asked us how they could invest in a broader range of real estate in the Munich Metropolitan Region. This was the starting shot for the Greater Munich Real Estate Fund. The fund was established and is managed by KVG Avana Invest GmbH. ehret+klein is responsible for asset management. Merck Finck Privatbankiers AG, which enjoys the trust of a network of interested investors, was acquired as the first sales partner.

The new, updated edition of the Real Estate Market Report is now available – two years after the first report was published. At the heart of report lies the Metropolixx, an attractiveness index that identifies 40 hot spots in the Greater Munich Region on the basis of a scoring model. The underlying mathematical model can also be applied to other metropolitan areas.

How does the scoring model work? Cities and municipalities with more than 3,500 inhabitants are assessed on the basis of four real estate sectors: residential, office, food retail and large-scale retail. The cities and municipalities in each sector are classified according to the categories A, B, C and D. Category A indicates locations with a very high level of investment potential. A lucrative location is classified as category B. Category C indicates solid investment potential. Category D includes cities and municipalities that do not currently offer any incentives for investment but which may do so in the future, depending on development of the location.

As expected, category A include the municipalities that surround Munich and those near the airport , e.g. Freising, Hallbergmoos, Garching and Unterföhring. There are, however, other investment hot spots offering significant potential that lie outside of the Greater Munich Region, e.g. in Augsburg, Ingolstadt and Landshut. Other cities that offer attractive investments (category B) are Dingolfing, Karlsfeld and Aschheim. Oberhaching, Unterhaching and Rosenheim in the south of Munich also rank among the top 40. Fürstenfeldbruck, Pfaffenhofen an der Ilm and Starnberg (category C), among others, promise good investment opportunities. No less attractive are the hot spots in category D, including Germering, Olching and Vaterstetten, to name just a few.

Real estate development requires a holistic and sustainable approach

Not only is the investment potential that a region offers of vital importance but also the question of its (urban) development potential. How can regions be made even more attractive? Each region is unique and has its own particular virtues, i.e. strengths and development opportunities. Discovering what they are and working together with the local population to make the most of them is what makes real estate and project development so exciting. What is needed in this context are innovative overall strategies for tackling the topics living and working, infrastructure, digitalization, mobility, health and education.

Viewed from this perspective, the new Greater Munich Real Estate Market Report 2018/2019 and the scoring model not only offer investment proposals but also serve as a source of ideas and open up a discussion on how to create sustainable properties and urban developments that people actually want to live in. One thing is clear. Only if a holistic and sustainable approach to real estate development is taken, will it prove attractive to investors, municipalities and all other stakeholders.