Strategy-related Opportunities

Renting out contemporary and affordable housing in the long run, creating new homes, improving our customers’ quality of living and significantly reducing the greenhouse gas emissions originating from our properties are at the core of Vonovia’s corporate strategy. Our business model is designed to take into account the megatrends that are relevant to us (urbanization/shortage of housing, demographic change, climate protection) and the exploitation of economies of scale. By managing larger contiguous stocks, we can not only manage the homes we offer in a particularly cost-effective manner, but can also make an effective contribution to social tasks – first and foremost by reducing the shortage of homes in conurbations and achieving the climate transition. If social pressure to find solutions to social challenges continues to mount, the overall conditions for implementing our business model could also improve further.

According to the Federal Climate Change Act (Klimaschutzgesetz), Germany is aiming to be greenhouse gas-neutral by 2045. We can, and indeed want, to make a significant contribution to improving greenhouse gas emissions by building new homes in line with the latest energy and material standards, and by energy-efficient modernization. We made a commitment to a climate path that will enable us to achieve virtually greenhouse gas-neutral management of our portfolio by 2045. Homes with positive energy concepts not only protect the climate, but also reduce heating costs. This makes them more attractive to our customers. What is more, the improved structural specifications increase property values. If we make faster progress than planned on our climate path, this could have a knock-on positive impact on earnings and value development.

Low-emission refurbishment and new construction measures entail substantial investment. In this respect, we benefit from the fact that optimizing the energy efficiency of our portfolio has been at the core of our climate strategy since as long ago as 2017. Since then, our modernization/refurbishment rate has consistently outstripped the German average. In order to keep costs at a minimum, we make use of innovations (e.g., Energiesprong) and focus on tried-and-tested urban quarter approaches in the implementation process.  We reduce construction times and conserve resources through efficient construction methods and the use of sustainable, ecological building materials. Should the overall economic conditions (interest rates, subsidy conditions, construction prices) improve, we could make even greater use of the opportunities open to us in the area of low-emission refurbishment and new construction, with a positive impact on rental income.

As we transition towards climate-neutral neighborhoods offering real quality of life, we expect opportunities to arise for us from the targeted digital networking of electricity, heat and mobility. Our company is in an excellent position, with its contiguous portfolios, to successfully implement what is known as sector coupling. We are cooperating with relevant research institutions and implementing successful pilot projects within this context. The concept of a networked supply to the neighborhood could be implemented on a larger scale more quickly than expected. This would then have positive implications for long-term earnings development.

Relevant opportunities are also arising for us from the expansion of renewable energies; this refers to the direct sale of green electricity to our tenants, as well as the production (and sale) of electricity from renewable sources at our properties. With this in mind, we are forging ahead with the expansion of photovoltaics programs and the sale of electricity to tenants (tenant electricity), among other things.  Photovoltaics systems can be connected to the heat supply (heat pumps). The implementation of concepts for energy self-generation could be realized faster than planned with a corresponding positive impact on the earnings situation. The Power Purchase Agreement concluded between Vonovia and RWE Supply & Trading enables alternative ways of generating and purchasing energy and opens up further growth potential. The Power Purchase Agreements (PPA) has initially been concluded for a term of one year. The electricity will come from the Wust-Fischbeck onshore wind farm near Stendal. This makes Vonovia one of the first residential real estate companies to conclude a PPA for green electricity. Green electricity has been supplied since January 2024. The electricity is generated by ten wind turbines.

Research data on projected demographic trends suggest that population growth will continue both in Germany and in parts of Europe over the coming years. Immigration is a key growth driver. This means that demand for affordable housing will remain high or even continue to grow. As things stand at present, the fundamental need for housing is unlikely to be met in full by general new construction measures, either in the short or medium term. This translates directly into opportunities for us for the rental, development and new construction business.

Demographic change towards an aging society continues, and is increasingly leaving its mark. Demand for senior-friendly and affordable homes is expected to increase further over the coming years. As a result, opportunities could arise from senior-friendly modernization of our apartments and investment in new and innovative housing concepts. This is expected to come hand-in-hand with further rental growth.

In a quest to master the current social challenges, policymakers are also seeking to improve overall conditions on the housing market. The coalition agreement concluded by the current German government promised initiatives to both significantly increase the supply of affordable homes through new construction and transform existing properties in a manner that is as climate-neutral as possible. Implementation of these projects is currently stalling – with a marked adverse effect on the housing markets (drop in new construction, growing shortage of housing). As soon as short-term solutions can be found to address this problem in terms of improved subsidy conditions and price developments, corresponding opportunities will also emerge for us.

The capital required to solve the challenges facing the housing industry cannot be raised without private sector involvement. As a result, policymakers are increasingly being called upon to create an investment climate that encourages long-term equity and debt capital providers to make substantial investments in the residential real estate markets. A positive investment climate also means making the necessary ecological construction and modernization measures commercially viable, making additional land available for construction, cutting back on red tape and generally promoting acceptance of private-sector real estate investors. The increasing acceptance of long-term investors for projects in the German residential construction sector is likely to open up further development opportunities for Vonovia.

With our management platform, we pursue an efficient business model that is scalable at all times. This also makes it suitable for managing new portfolios that we add to our portfolio through acquisitions. Vonovia pursues acquisitions as and when opportunities present themselves in light of the current opportunities for returns and financing. If overall conditions improve, there is an opportunity for us to have a positive impact on our business development by resuming acquisitions.

Levels of satisfaction among our customers are closely linked to the performance and motivation of our employees working in customer service. Our corporate strategy also focuses on our employees’ further development and on employee satisfaction. We aim to make use of new HR development concepts and actively shape the recruitment of new staff to fill vacant positions. We are aiming to increase the proportion of women at the first and second levels of management. All in all, further opportunities could arise for Vonovia due to the advantages associated with diversity and as a result of our increased appeal as an employer, namely higher levels of production and lower staff turnover rates.