Saturday, 15 March 2025
Property management in Germany faces mounting pressure on profit margins, exacerbated by rising demands, inflation, and increasing regulatory requirements. Despite longstanding concerns over profitability, the industry now contends with additional hurdles, including stricter energy efficiency rules and a shortage of skilled workers. Experts warn that current fee structures are insufficient to keep pace with rising costs, threatening long-term sustainability in the sector.
At an online panel hosted by RUECKERCONSULT, industry leaders discussed the challenges and potential solutions for property managers. Participants included Prof. Dr. Marco Wölfle (Center for Real Estate Studies), Thomas Junkersfeld (B&L Property Management), Marc Mockwitz (Cloudbrixx GmbH), Carolin Brandt (HIH Real Estate), and Thomas Heidelberger (REIC GmbH).
The findings of the Property Management Fees 2024 study provided a backdrop for the discussion. The report highlights an ongoing consolidation trend: the share of companies managing over 500 residential units has increased by 10% in recent years, with 27% now overseeing between 500 and 3,000 units. Properties exceeding 3,000 units, once rare, now account for 4% of portfolios and are on the rise.
“Germany’s rental housing market remains fragmented, making professional management of smaller properties cost-prohibitive,” explained Prof. Dr. Marco Wölfle. Fixed costs, including accounting and property oversight, disproportionately impact smaller properties, further squeezing margins.
Commercial property management is equally under strain. Thomas Junkersfeld, Managing Director of B&L Property Management, noted that while expectations have soared, fees have not kept pace. “Inflation, higher labor costs, and increasing regulations have all intensified pressure,” he said.
In residential management, standard fees remain modest, ranging between €27.37 and €41.65 per unit per month, reflecting only a €4 increase over two years. In commercial real estate, fees are typically tied to property costs, ranging from 3% to 6% of target rents. Despite this, special administrative services, such as modernization projects, are rarely compensated separately, although a growing number of property managers now charge 3% to 5% of project costs for additional work exceeding €5,000.
Marc Mockwitz, CEO of Cloudbrixx GmbH, sees digitalization as a solution to improve profitability. “Digital tools offer real added value for both property managers and clients, simplifying processes, increasing transparency, and driving efficiency,” he said. However, adoption remains inconsistent: while some small firms have fully digitized operations, larger players often lag due to overly complex systems or reliance on outdated tools like Excel.
“Organizing chaotic portfolios manually wastes time and money,” Mockwitz emphasized. “A digital ecosystem for storing and analyzing data is crucial for future efficiency and better margins.”
However, Carolin Brandt, Managing Director of Asset Management at HIH Real Estate, cautioned that digitalization alone cannot resolve all industry challenges. “Efficient processes are equally critical, especially for small firms that cannot afford full-scale digital solutions,” she explained.
Brandt also highlighted the issue of underpricing. “Many property managers offer unrealistically low fees to win contracts, but quality service cannot come for free,” she said. At HIH, which manages properties worth €14 billion and spanning 3.84 million square meters, cost-efficiency remains paramount, yet Brandt underscored the importance of fair pricing.
A further challenge lies in the overlapping responsibilities of facility, property, and asset managers. “It’s often unclear who is responsible for which tasks, leading to inefficiencies,” Brandt noted. Thomas Heidelberger, Managing Director of REIC GmbH, echoed this sentiment: “International companies are baffled by Germany’s practice of paying three managers to handle simple tasks, like fixing a dripping tap.”
Heidelberger called for greater transparency around fee structures, particularly in the commercial sector, where negotiations often drive fees below 3%. “Service quality determines price, and this needs to be clearly communicated,” he said.
As property managers face mounting operational demands, rising costs, and stagnant fees, panelists emphasized the need for:
1. Realistic pricing models to reflect increasing workloads.
2. Strategic digitalization to improve efficiency and transparency.
3. Clarified responsibilities to streamline overlapping roles and reduce costs.
Ultimately, the industry must balance cost control with quality, ensuring fair compensation for services while meeting evolving client and regulatory expectations. As Prof. Dr. Marco Wölfle summarized, “Property managers must adapt to structural changes and rising demands if they are to remain profitable and sustainable in the years ahead.”
