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PGIM bets on Germany's terraced homes with modular rental strategy

A bold move by Prudential's PGIM could reshape Germany's housing crisis. Why modular homes and institutional backing may unlock stalled developments.

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1 min read
The image shows a large building with many windows in the middle of a city, surrounded by street...
The image shows a large building with many windows in the middle of a city, surrounded by street poles, street lights, electric poles, electric cables, motor vehicles on the road, bushes, trees and a sky with clouds in the background. This building is the headquarters of Deutsche Bank in Frankfurt, Germany.

PGIM bets on Germany's terraced homes with modular rental strategy

PGIM, a subsidiary of Prudential Financial, is preparing to enter Germany’s terraced house market. The move signals a rare shift as large institutional investors begin targeting the country’s single-family home sector. Until now, such players have had little involvement in this area.

The company plans to develop terraced houses in commuter areas around major German cities using modular construction. These homes will be built for long-term rental rather than resale, marking a new approach in a market where financing often depends on pre-sales. Germany’s real estate sector has seen a slowdown in transactions, pushing developers to rely on pre-sales to secure project funding. To ease this pressure, large investors like PGIM are now stepping in. They offer partial guarantees on these pre-sales in return for lower entry prices.

PGIM estimates the cost of building these terraced houses at between €1,900 and €2,000 per square metre. Once completed, the company intends to rent them out at €17 to €18 per square metre. This would place total monthly rents for such properties in the range of €1,700 to €1,800.

The strategy reflects a broader trend of institutional investors exploring new segments. By focusing on long-term rentals instead of quick resales, PGIM aims to create stable returns in a market where demand for affordable housing remains high. PGIM’s entry into Germany’s terraced housing market introduces a new dynamic. The company’s focus on modular construction and long-term rentals could provide a steady supply of homes in high-demand commuter areas. With institutional backing, developers may also find it easier to secure financing in a market that has struggled with sluggish activity.

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