Strategy-related Opportunities

Renting out contemporary and affordable housing in the long run, creating new homes, improving our customers’ quality of living and offering property-related services such as energy, solar power, etc., 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 use of our management and development platform. 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. Based on the existing strategy, Vonovia has developed a new growth strategy and initiatives that will generate future earnings potential.

The demand for affordable homes will remain high or continue to increase over the next few years as the gap between housing demand and housing supply continues to widen. 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 and sociological aspects will remain the principal growth drivers. 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.

The expansion of the development business is an important part of this strategy. Vonovia’s new construction activities are focused on a product portfolio that is geared toward market requirements with flexibility in how properties are used, either for the company’s own portfolio or for sale (development to hold/development to sell). In light of the ongoing need to optimize construction costs, Vonovia is focusing on the “Basic House” approach, among other things, in order to build sustainable and affordable housing for different target groups. The emphasis is on new projects employing serial modular timber construction methods together with the company’s joint venture partner Gropyus. We reduce construction times and the implementation risk, and conserve resources, through efficient construction processes managed using our development platform, e.g., the introduction of “Building Type E” approval (new initiative aimed at simplifying and reducing costs in the construction industry) and the use of sustainable, ecological building materials.

According to the Federal Climate Change Act (Klimaschutzgesetz), Germany is aiming to be greenhouse gas-neutral by 2045. 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 positive knock-on impact on earnings and value development.

Decarbonization and modernization measures in buildings 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 for many years now. 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 and smart technologies, and focus on tried-and-tested urban quarter approaches in the implementation process.

Opportunities in the implementation of energy-efficient modernization work arise from efficient processes, bringing investments forward and cost scaling. We are pursuing this strategy using the concept of serial refurbishment, an industrialized system that bundles and standardizes all steps in the refurbishment process. Forging ahead with investments in heat pump technology is also part of our investment initiative. In this area, we are focusing on the new “EnerCube” heating solution, a heat pump center that combines all the necessary components in an external module and is installed on site outside the building.

By expanding our own specialist capacities and resources for climate change adaptation, we have an opportunity to gain a competitive edge over our peers by making the necessary structural adjustments in our portfolio (e.g., measures to protect against heat stress) at an early stage.

The purchase of buildings that have not yet been modernized, their subsequent modernization and resale are to be integrated into Vonovia’s business model as a new initiative. The experience gleaned from this initiative is to be used in the development and modernization process.

Relevant opportunities are also arising for us in the Value-add segment from the expansion of renewable energies; this refers to the direct sale of solar power to our tenants, as well as the production (and sale) of electricity from renewable sources at our properties – and, as a result, the creation of a full product portfolio covering all stages in the value chain from generation to storage, energy management and sale. With this in mind, we are using growth initiatives to forge ahead with the considerable expansion of photovoltaic 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. Vonovia has a potential output of around 700 MWp from photovoltaic systems and can also install up to 14,000 heat pumps in the long term. The aim is to increase market penetration in all product groups. The planned expansion is to be achieved increasingly with the company’s own employees – resulting in further opportunities on the cost and income side (e.g., purchasing advantages, craftsmen’s availability, etc.).

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 Agreement (PPA) for green electricity has initially been concluded for a term of one year. Green electricity has been supplied since January 2024 and this will continue over the next few years.

Vonovia’s business model is founded on its efficient management platform, which spans the entire housing lifecycle. As part of the company’s growth initiatives, this platform is also to be made available to third-party customers, positioning Vonovia as a full-service management service provider with opportunities to tap into further earnings potential.

With our management platform, we pursue an efficient business model that is scalable at all times. It is also ready to manage new portfolios that we add to our portfolio through acquisitions, as past experience has shown. Vonovia pursues acquisitions as and when opportunities present themselves in light of the current opportunities for returns and financing. If overall conditions continue to improve, there is an opportunity for us to grow 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.