LEG Expects Rental Growth of 2.9% to 3.1% in 2027
Key Facts
LEG Immobilien said in a statement on its results for the first nine months of 2026 that it expects moderate rental growth of between 2.9% and 3.1% in fiscal 2027. The company said the range is close to its long-term average before the sharp rise in prices and wages since 2022. It expects adjusted funds from operations, its key earnings measure, to grow by a further 4% compared with 2026, based on the midpoint of the range. It put the measure for 2027 at between €230 million and €250 million. The statement did not say that the rental forecast was below analysts’ estimates.
LEG affirmed its 2026 guidance for adjusted funds from operations of €220 million to €240 million. Based on the midpoint of that range, the forecast implies growth of about 4% compared with the level achieved in 2025. This follows the company reporting €190.1 million in the first nine months of 2026, up 4.9% from €181.3 million in the corresponding period of 2025. The company attributed earnings growth to strong letting performance and encouraging expansion in value-added services. It said demand for affordable housing in Germany "remains unabated."
Like-for-like net cold rent rose 3.6% to €712.4 million in the first nine months of 2026. Like-for-like rent increased 3.9% over the same period, including 50 basis points from higher rents in subsidized housing. Average net cold rent was €7.29 per square meter, or about €460 a month for a typical apartment of about 63 square meters. At the end of the nine-month period, the like-for-like EPRA vacancy rate fell 20 basis points to 2.5%. These indicators put the expected rental growth for 2027 in the context of letting and occupancy performance recorded during 2026.
The company said rent increases in subsidized housing are made once every three years, and large parts of its subsidized portfolio will come out of restrictions during 2027 and 2028. LEG expects rental growth to return to higher levels in subsequent years as those restrictions expire. In the first half of 2026, like-for-like rent rose 3.7% to €7.21 per square meter, compared with €6.96 in the corresponding period of 2025. In August, the company had forecast full-year like-for-like rental growth of between 3.8% and 4.0% in 2026 and said it was on track to achieve its rent adjustment target for that year. The 2027 range, the company said, remains in line with its long-term average before the rise in prices and wages since 2022.
LEG plans to invest about €35 per square meter in 2027 and said its investment plans will remain largely unchanged. It added that growth in adjusted funds from operations will offset adverse effects, particularly higher interest expenses. The average cost of financing was 1.82% on September 30, 2026, while the average remaining maturity was 5.4 years. The loan-to-value ratio for real estate assets was 46.5% on that date, compared with 48.3% on September 30, 2025. The company had said that unit sales in the third quarter came in below expectations because of market conditions and delays in signing deals and transferring ownership. It therefore no longer expects to reach a loan-to-value ratio of about 45% during 2026, while continuing to pursue that target in the following year.
LEG expects a negative valuation result of up to 1% in the second half of 2026 because of inflation-driven market price movements. It said this would offset valuation gains in the first half, leaving the valuation result for 2026 as a whole close to stable. In September 2026, Moody’s upgraded the company to Baa1 with a stable outlook. LEG said its liquidity and completed financing cover maturities through autumn 2027, and that its nearest bond maturity, of €500 million, falls due in November 2027. The company intends to distribute 100% of adjusted funds from operations, plus a portion of net proceeds from property sales, to shareholders. The distribution proposal is due to be approved in February 2027 and published with the 2026 annual results.