Investment Focus – The Rhine-Ruhr Area of Germany

Whilst ProVenture have operated to a great extent in the former East of Germany for our first 5 years of operation, we continually seek new markets in which to operate across the country. The economy across the country is continually performing well despite the headwinds of the current Eurozone crisis [I sit her now in Feb 2012] and the economy is set fair for a positive decade you would say. Certainly after it sat in the doldrums for much of the 90s and early century whilst re-unification weighed down and productivity was improved. Our journeys in the West have so far taken us to the port of Bremerhaven, a yield market which we opened up for clients in 2011. Here, we are achieving 8-12% yields, backed with 80% finance and a strong tenant sector. Perfect conditions you might say. Whilst the Bremerhaven market is fairly small, we seek similar conditions across the state of North Rhine Westphalia {NRW], and set out our case for investment in this short paper.

The state of NRW is home to one of the biggest industrialised areas in the world, the Rhine-Ruhr area or Ruhrgebeit in German. The area is mapped below, with familiar cities such as Cologne and Dusseldorf.

The Rhine-Ruhr Area of Germany

One in 3 residents in the European union live with 500km of this region, this is the heart and life blood to the EU.

In the table below, the population in this area is given, with the major cities broken down. Some 10 million citizens makes for a huge market, which is still dominated by tenants in the residential housing sector, albeit to a lesser extent than the cities in the former east.

The Rhine-Ruhr Area of Germany

Broken down further, here we see a table of the independent cities by population, and density which is uniformly high across the region.

The Rhine-Ruhr Area of Germany


Historically, most of the Ruhr area was for the most part characterized by heavy industry since the age of industrialisation in the late 19th and early 20th century. Since the Middle Ages, Cologne, Dortmund and other cities were important regional trading cities, but during the 19th century the city of Düsseldorf grew to become the administrative center of the region and since 1945 its political capital.

Today, the Rhine-Ruhr metropolitan region accounts for roughly 15% of the GDP of the German economy, which would place it as the 3rd largest GRP of metropolitan area in the European Union and the 16th largest GDP in the world. Despite this size, the Rhine-Ruhr region often lacks international competitiveness from the lack of a unified presentation, in which cities and urban areas within it, often pursue a separate investment policy against each other.

From within, Düsseldorf and Cologne are by far the largest economic centres, with specialisation in financial/high tech and insurance/multi media services respectively. Other major economic centers are Bonn, Dortmund and Essen. The region is home to twelve Fortune Global 500 companies, among them E.ON AG, Düsseldorf, Deutsche Post AG, Bonn, Metro AG, Düsseldorf, Deutsche Telekom AG, Bonn, ThyssenKrupp AG, Essen/Duisburg, RWE AG, Essen, Bayer AG, Leverkusen,Franz Haniel & Cie. GmbH, Duisburg, Evonik Industries, Essen, Arcandor AG, Essen, Hochtief AG, Essen and the Henkel Group, Düsseldorf.

From west to east, the region includes the cities of DuisburgOberhausenBottropMülheim an der RuhrEssenGelsenkirchenBochumHerneHagenDortmund, and Hamm, as well as parts of the more “rural” districts WeselRecklinghausen,Unna and Ennepe-Ruhr-Kreis. Historically, the western Ruhr towns, such as Duisburg and Essen, belonged to the historic region of the Rhineland, whereas the eastern part of the Ruhr, including Gelsenkirchen, Bochum, Dortmund and Hamm, were part of the region of Westphalia. Since the 19th century, these districts have grown together into a large complex with a vast industrial landscape, inhabited by some 7.3 million people (when including Düsseldorf and Wuppertal). It is the fourth largest urban area in Europe after MoscowLondon and Paris.

Road transport

A 40 in Essen at night

The Ruhr has one of the densest motorway networks in all of Europe, with dozens of Autobahns and Autobahn like Schnellstraßen (expressways) crossing the region. The Autobahn network is built in a grid network, with 4 east-west (A2A40A42A44) and 7 north-south (A1A3A43A45A52A57A59) routes. A1, A2 and A3 are mostly used by through traffic, while other autobahns have a more regional function. Both A44 and A52 have several missing links, in various stages of planning. Some missing links are currently not considered to be constructed.

Additional expressways serve as bypasses and local routes, especially around Dortmund and Bochum. Due to the density of the autobahns and expressways, Bundesstraßes are less important for intercity traffic. The first Autobahns in the Ruhr opened during the mid-1930s. Due to the density of the network, and the number of alternate routes, traffic volumes are generally lower than other major metropolitan areas in Europe. Traffic congestion is an everyday occurrence, but far less compared toRandstad, another polycentric urban area. Most important Autobahns possess six lanes, but there are no eight-lane Autobahns in the Ruhr.

Public transport

All public transport companies in the Ruhr are run under the umbrella of the Verkehrsverbund Rhein-Ruhr, which provides a uniform ticket system valid for the entire area. The Ruhr region is well-integrated into the Deutsche Bahn, both in passenger and cargo rail.

Air transport

Düsseldorf International Airport serves as the interncontinental airport for North Rhine-Westphalia and is within 20 km for most of the Western Ruhr area. Dortmund Airport in the Eastern Ruhr is a mid-sized airport, offering scheduled flights to domestic and European destinations.

City Focus

Whilst the affluent cities of Dusseldorf and Cologne-Bonn support typically lower yields in the range 3-5%, there are cities within the region which support much higher yields, and are backed by good levels of finance to 80%. These areas are of interest to us at ProVenture and we will be operating in some of them in 2012-13.

For the purposes of this paper, we will select 2 cities, Herne and Gelsenkirschen for a focus on the investment case, although the cities of Duisburg, Essen, Bochum and Wuppertal are also areas in which we expect investment activity in the coming months.

Focus on Herne

The Rhine-Ruhr Area of Germany

In the middle of the region, nestled within and crossed by a myriad of autobahns and trains services, we find Herne, a city of 165,000 inhabitiants. Former employment was focused full square on heavy industry, but as Europe loses much of this to the developing countries, Herne has taken up the slack with service industry and high tech. Unemployment is slightly higher here than the region average of 9%, standing at 13% [2010 figures] but strong job supply. Population peaked in 1975 at around 190,000 and has fallen back over the years in line with many cities in the area. But the declines of late have been very small, in the order of 100s per year. With the expansion of the German economy over the next decade and the resultant migrant workers it will bring in, Herne is set fair for an increase in population.

In terms of its placing across the top 50 German cities based on economic factors for future development, Herne performs well at 11th place. The table below shows Herne’s position as compared to other cities in the NRW:

The Rhine-Ruhr Area of Germany

The factors which drive the city ahead are unemployment falling [5% over the last 5 years], an increase in disposable income by 12% and a 22% increase in GDP per capita over the same period.

So, we see a city which is repairing from the boom industrial years of the 70s and 80s and now diversifying and beginning to grow. But the wider investor confidence is yet to take yields down to the more normal levels of the region, and we see some interest here today.

Typical Property in Herne

The Rhine-Ruhr Area of Germany

Located on a quiet side street not too far from the commercial centre by foot, here we found an attractive period property with a lovely side building which has been turned into townhouses. Refurbished in the last year, there are 16 residential units which deliver at yield above 11% and priced per sqm at 516 Euro. The guide price is 540,000 Eur, and finance should be expected in the 70-80% range at today’s low rates of around 3,4%. In terms of cashflow, this type of unit cannot be beaten in all the areas in which we operate, at least in this quality of presentation.

In terms of typical rent levels, an average across the city of 4,87 Eur per sqm is paid with the following breakdown according to size:

The Rhine-Ruhr Area of Germany

Compared to income, rents are very affordable in the area. Expansion in rents should be expected if the population upswing occurs and also as the cost of living index increases over time.

Focus on Gelsenkirchen

The Rhine-Ruhr Area of Germany

To the west of Herne is the city of Gelsenkirchen, population bigger now at 260,000 apporx but with much the same character as Herne is terms of local economy and infrastructure.

In terms of local industry, the city houses a large science park and also a solar farm which was the first in Germany, with many off-shoots into the new energy sector as a result. Typical companies are below

The Rhine-Ruhr Area of Germany

In terms of population, the city follows much the same trend as Herne, however parts of the city are already experiencing population growth such as the Altstadt and Feldmark. As far as econmic development, from the table above for Herne, we see the city as 12th over the whole country in terms of forward looking indicators. Big things pulling ahead the rest are unemployment falling 9% over the last 5 years, disposable income up 9.6% and GDP up nearly 16% over the same period.

Rental Scene

Rental levels are much as Herne today, with an average rent in the city of 4,76 Eur per sqm, and across the apartment sizes:

The Rhine-Ruhr Area of Germany

In terms of rental development over the last 12 months, the city shows a general increase of around 5%, and rent still are very affordable

The Rhine-Ruhr Area of Germany

Property Example

The Rhine-Ruhr Area of Germany

We find here a typical apartment house in the Rurhgebeit area, with 12 rented apartments and an asking price of 420,000 Eur which gives a price per sqm of 528 Eur per sqm. Recently refurbished, the unit deliver 10.6% yield and finance should be expected in the 70-80% range again.


As investors, we continually look to new areas to deliver the much sought-after yields in the range 8-12% backed with up to 80% finance at good interest rates. Whilst much of this region delivers yields far below this range, we are finding deals which do meet this criteria which is a real surprise in this economically vibrant region. If you are planning a property tour of Germany, we would be delighted to show you current property examples in this area, you can view a selection here and support your research further.