PGIM bets big on Germany's rental terraced homes amid sluggish real estate market
PGIM, a subsidiary of Prudential Financial, is making a bold move into Germany’s single-family home market. The company plans to develop terraced houses, focusing on long-term rentals rather than resale. This shift marks a significant change in a sector where institutional investors have rarely ventured before now. The company’s strategy involves building terraced homes in commuter belts around major cities. Using modular construction, PGIM aims to keep development costs between €1,900 and €2,000 per square metre. Once completed, the properties will be rented out at €17 to €18 per square metre, resulting in total monthly rents of around €1,700 to €1,800.
The move comes as Germany’s real estate transaction market remains sluggish. Developers now rely on pre-sales to secure financing, prompting large investors to step in. By partially guaranteeing these pre-sales, they help lock in lower entry prices. PGIM’s decision to prioritise rentals over resale reflects a broader trend. The company sees strong demand for family-friendly housing in well-connected areas outside city centres.
PGIM’s entry into the terraced homes market could reshape Germany’s real estate landscape. With affordable rents and a focus on commuter-friendly locations, the company aims to attract long-term tenants. The strategy also signals growing institutional interest in a segment previously dominated by private buyers.
