Portfolio in the Development Business
Vonovia Development Under the BUWOG Brand Name
It is under the BUWOG brand that Vonovia’s Development business area has become firmly established, primarily in Vienna and Berlin.
The regional distribution of the development activities covers the whole of Germany with a focus on the Berlin, Rhine-Main, Dresden/Leipzig, Hamburg, Stuttgart and Munich regions. The focal region in Austria is Vienna.
BUWOG provides Vonovia with a development platform spanning the entire value chain – from the purchase of land to its development, project planning, construction and sale.
With its substantial product pipeline of residential construction projects that are currently being built, planned or prepared, Vonovia, with the BUWOG brand, ranks among Germany’s leading building contractors and is the most active private building contractor in Austria.
Development Business Model
As a major player in the residential real estate segment, Vonovia seeks to use its property development expertise to offer targeted solutions in response to current challenges such as the shortage of housing, climate change, integration and cross-generational housing. The development business allows Vonovia to provide answers to the challenges resulting from megatrends.
In the 2022 fiscal year, Deutsche Wohnen’s development activities were integrated into BUWOG’s structures on the basis of an agency agreement. Deutsche Wohnen’s motivation was to benefit from BUWOG’s development platform and expertise in particular, as well as leveraging harmonization effects and economies of scale.
With the skills of the two companies now bundled and the options available for exploiting synergy potential on both sides, the challenges facing the residential real estate market in terms of new construction can be mastered more quickly and efficiently.
Sustainable and Successful Development
Development Business Model
As part of the strategic analysis, Vonovia’s development activities were considered to make an important value contribution and the development business was identified as a key value driver.
The range of products for value creation ranges from the sale of individual new-build condominiums in the context of development projects to new construction projects on land purchased, and land already held, for the company’s own portfolio and global sales of large-scale projects to investors.
Development to Sell and Hold (Number of Residential Units)*
Conceptual and technical solutions for the resource-light construction and sustainable operation of neighborhoods make up a key component of the development business model. In line with the three focal issues of urbanization, energy efficiency and demographic change, central aspects of sustainability are already taken into account in the early stages of project development. This includes designing socially diverse neighborhoods that offer housing for all generations, realizing energy-efficient new construction projects for ecologically sustainable operation by buyers, as well as for a carbon-neutral portfolio, and creating barrier-free and fully accessible housing for an aging society with changing housing needs.
Valuable Contributions to Society and the Group
Sustainability is achieved at all stages in the residential real estate value chain – from the selection of ecological and recyclable building materials, to the commissioning of local craftsmen and service providers, and the sustainable operation of the development projects.
Certification is important to ensure that potential improvements can be made back at the planning stage on the basis of criteria for ecological, social and economic sustainability and managed during the construction process.
Value Creation and Project Development
Real estate development activities can be tackled successfully through long-standing experience, extensive market and sector expertise and intensive, ongoing market analysis, making a valuable contribution to value creation, sustainability and to alleviating the shortage of housing.
The strategy of incorporating process steps into the company’s own value chain allows Vonovia to provide stringent and targeted support to residential construction projects and to exploit cost synergies with regard to technical solutions and the pooling of procurement volumes. Being able to cover the entire real estate development value chain internally makes the company more efficient and, as a result, more profitable.
In the Development segment, we make a distinction between two different areas:
- Development to sell includes the units that are sold to investors or to future owner-occupiers directly.
- Development to hold refers to those residential construction projects whose apartments will be added to Vonovia’s rental portfolio upon their completion.
The prevailing conditions in the residential real estate sector, which are characterized by rising construction costs and higher interest rates, are changing the demands that real estate development projects have to meet in terms of profitability and financing. With this in mind, projects are analyzed with regard to their allocation to the two different areas of development, and are reallocated if necessary.
Based on these profitability criteria and internal financing requirements, the Potsdam-Krampnitz project was partially reallocated from the “to hold” portfolio to the “to sell” portfolio in 2023. This reallocation involves a total of 859 units and a project volume of € 481.6 million.
Development Overview
As of December 31, 2023, the total volume of the development portfolio was 55,482 residential units (a total of 6,979 units from projects under construction and a total of 48,503 units from the pipeline).
As of December 31, 2023, there were 20,416 residential units in the “to sell” development portfolio, 4,998 of which related to projects under construction, 1,173 to projects from the short-term pipeline and 14,245 to projects from the medium-term pipeline. The share attributable to project development in Germany came to 17,755 units (4,998 of which related to projects under construction, 600 to projects from the short-term pipeline and 12,157 to projects from the medium-term pipeline). 6,343 units were attributable to Deutsche Wohnen. The share attributable to project development in Austria came to 2,661 units (573 units from the short-term pipeline and 2,088 from the medium-term pipeline).
As of December 31, 2023, there were 35,066 residential units in the ”Development to hold” portfolio, 1,981 of which related to projects under construction, 253 to projects from the short-term pipeline and 32,832 to projects from the medium-term pipeline. The share attributable to Germany came to 28,995 units (1,981 units under construction, 253 units from the short-term pipeline and 26,761 units from the medium-term pipeline). The share in Austria came to 3,317 units (3,317 units from the medium-term pipeline). The share in Sweden came to 2,754 units (2,754 units from the medium-term pipeline).
A total of 1,309 residential units were completed in this area with 839 in Germany, 296 in Austria and 174 in Sweden.