On 30 January 2026, a law was passed in Berlin that has the potential to fundamentally transform the German property market, and yet hardly anyone is talking about it. The so-called Location Promotion Act enables open-ended property funds, for the first time, to invest billions in renewable energy.
The figure involved is impressive: around 19 billion euros could flow into solar parks, wind farms and charging infrastructure in the short term. But what does this actually mean for investors, property owners and project developers? And why is this law being introduced right now?
What the Location Promotion Act really changes
Until now, it has been virtually impossible for open-ended property funds to invest in renewable energy, at least without incurring tax disadvantages. The reason: German tax law set strict limits. For example, any fund that purchased a solar park risked losing its tax-privileged status.
The new Act brings about a fundamental change:
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Open-ended property funds may now invest up to 15 per cent of their assets in renewable energy
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These include solar parks, wind turbines and charging infrastructure
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Investments are tax-protected
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Energy can be sold directly to tenants (key term: tenant electricity)
This may sound technical at first, but in reality it represents a paradigm shift for the entire sector.
Why now, of all times? The crisis facing open-ended property funds
The timing is no coincidence. Open-ended property funds are currently in the midst of a deep crisis:
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Billions in outflows since 2023
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Falling or stagnating returns
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Loss of investor confidence
An asset class that was considered stable for decades is suddenly under pressure. Many funds are grappling with two problems at once:
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Securing liquidity (to meet redemption requests)
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Tapping into new sources of return
This is precisely where the Location Promotion Act comes in.
Renewable energy as a new source of returns
Investments in renewable energy offer several advantages at once:
Predictable cash flows
Long-term electricity purchase agreements and feed-in tariffs ensure stable income, often for over 20 years.
ESG considerations
Sustainability has long been a key factor for institutional investors. Funds that invest in green energy significantly enhance their standing.
New business models
Through tenant electricity schemes, funds can sell electricity directly to their tenants, creating an additional source of income.
This makes renewable energy particularly attractive for an industry in urgent need of new prospects.
19 billion euros: how realistic is that?
The maths is simple: the total volume of open-ended property funds in Germany stands at around 120 billion euros. 15 per cent of that amounts to roughly 18 to 19 billion euros.
Some major market players have already responded. Commerz Real, for example, plans to reallocate around one billion euros to renewable energy over the coming years.
This shows that the shift has already begun.
The risks that hardly anyone talks about
So much potential, but no risks? Yes, there are – and they are crucial.
1. Lack of expertise
Managing property is a completely different matter from running energy projects. Many funds simply lack experience in this area. Misjudgements can quickly prove costly here.
2. Bureaucracy remains a problem
Even though the law makes investment easier, it also brings with it new regulatory requirements. Documentation and reporting obligations could slow projects down.
3. Fluctuating energy prices
Revenue from energy projects is more stable than many property returns, but it is not risk-free. Electricity prices remain subject to market fluctuations.
What does this mean for property investors?
The law opens up new opportunities, but only for those who make the most of it.
For fund managers
Speed is now of the essence. Those who invest in renewable energy early on secure a competitive edge. Collaborating with experienced partners is often the key to success.
For property owners
Tenant electricity schemes are becoming more attractive than ever. A rooftop solar panel system can:
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reduce service charges
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increase the property’s appeal
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generate additional income
For project developers
A new group of buyers with enormous capital requirements is emerging. Funds are actively seeking projects in the renewable energy sector.
This opens up new business models beyond traditional property development.
Conclusion: Game-changer or an overrated law?
The Location Promotion Act is not just a short-term fad, but a structural intervention in the market.
It bridges two worlds:
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Property
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Energy
And that is precisely where its strength lies.
The coming years will reveal which market players seize this opportunity and which ones fall by the wayside.
One thing, however, is already clear:
This legislation will change the rules of the game.
