The German real estate investment market has confirmed its moderate upward trajectory in the first three quarters of 2025. After nine months, transaction volume reached approximately €23.9 billion, representing a slight increase of two percent compared to the prior-year period. This development indicates progressive market stabilization. However, one cannot yet speak of market dynamism – the environment remains heavily influenced by external factors and selective investor sentiment.

We see light at the end of the tunnel, but the recovery is proceeding at varying speeds. Geopolitical risks, such as conflicts in the Middle East or trade tensions with the US, continue to dampen sentiment, which often appears more pessimistic than actual market conditions warrant. The interest rate environment provides positive momentum, serving not only as a catalyst amid stabilizing inflation figures but also leading to improved planning certainty and increased market activity.

Following the ECB's interest rate moves through spring 2025, a consolidation phase has emerged. The central bank left key rates unchanged at its September 2025 meeting, emphasizing that inflation developments and outlook currently require careful consideration. This means the harsh repricing of 2022 to 2024 has been halted for now, making financing and refinancing decisions more predictable for investors and lenders.

Ten-year German government bond yields have settled in a corridor around 2.6 percent, while five-year swap rates relevant for real estate financing are trading at approximately 2.9 percent. The bid-ask spread between buyers and sellers is also gradually narrowing, forming the foundation for increased transaction activity in coming months. Additionally, banks are showing greater willingness to finance projects again, supporting the overall cautiously positive sentiment. Nevertheless, risk perception remains at noticeably elevated levels. Particularly in the commercial sector, the share of non-performing loans has risen, primarily driven by the office segment. The maturity structure of commercial financing suggests refinancing issues will likely gain further importance in 2026. However, we maintain that there will be no wave of distressed sales. Analysis of seller motivations in 2024/2025 shows that only approximately 35 to 40 percent of transactions were involuntary, occurring due to liquidity and (re)financing problems or pressure from capital providers.

€23.9 bn

volume of transactions in Q1-3 2025

+2 %

compared to Q1-3 2024

The Living asset class continues to rank first, as in previous quarters. €7.7 billion (32 percent share) flowed into residential properties, care facilities, or student housing in the first nine months. This result correlates with current market sentiment and bidding processes observed by JLL. The JLL Global Bid Intensity Index rose slightly at the end of the third quarter, primarily driven by an increase in transaction processes and convergence between seller and buyer price expectations.

Beyond Living, we are experiencing revitalization in the office market. Office properties changed hands for almost €4.9 billion, with their share of total German transaction volume rising to 20 percent. This already represents nearly 90 percent of the prior year's result. The performance across all asset classes is driven by numerous smaller and medium-sized transactions – a central positive finding in the nine-month statistics shows deal count increased eleven percent compared to the prior year. What is notably absent from the office market are large transactions. Through end-September, only 27 transactions exceeding €100 million were registered, compared to 49 in the same prior-year period. The sale of UpperWest in Berlin, the sale of a residential portfolio by ZBI/UniImmo for €750 million, and the sale of over 100 furniture stores by the Porta Group to XXXLutz for a high three-digit million amount from the first half remain at the top of the largest deals list.

The retail sector has stabilized significantly. This sector achieved €4.3 billion year-to-date (18 percent share). Beyond continued strong demand for the specialist retail segment, shopping centers are slowly returning to investors' shopping lists.

Conversely, the logistics sector faces persistently tense global trade conditions, with consequences of the weakening rental market now impacting the investment market. With transaction volume of approximately €4.2 billion, this asset class ranks level with retail. However, compared to the prior year, over €500 million is missing, and together with mixed-use portfolios or properties, this sector is the only one showing a decline in the twelve-month comparison. We expect new momentum in coming quarters, as defense and security themes gain increasing weight alongside e-commerce. Numerous funds are reconsidering and redefining their ESG guidelines. Consequently, this readjustment should lead to increased demand for industrial and logistics space.

Number of portfolios

Volume each ≥ €100 mn

22

Q1-3 2024

17

Q1-3 2025

In times of geopolitical tensions and trade relationship realignment, examining capital allocated by foreign investors in Germany proves worthwhile. According to Bundesbank data, foreign direct investment in Germany across all sectors already totaled approximately €70 billion in the first half. This represents significantly more investment in Germany than in all of 2023 and 2024 combined. Investors from other countries often view investment opportunities through a different lens and seek to capitalize on opportunities linked to the federal government's investment packages. We observe a similar pattern in real estate. Foreign investors scaled back their buying and selling activities during the general weakness phase in the German investment market in 2022 and 2023. However, since 2024 we have seen an upward trend that has manifested throughout the current year. International investors acquired German real estate worth €8.8 billion in the first three quarters of 2025, while selling only €5.2 billion worth of properties. On balance, they built up approximately €3.6 billion in holdings and are acting as net buyers. This balance already exceeds that of the entire years 2023 and 2024, documenting that German real estate continues to be viewed as a positive investment.

The seven real estate strongholds (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, Stuttgart) recorded a transaction volume of €10.4 billion in the first three quarters, representing a 15 percent decline compared to the prior-year period. Their share of total German volume thus fell from 52 percent in the first half of 2024 to 44 percent currently. Development varied significantly by region: while Hamburg (plus 29 percent) and Düsseldorf (plus eight percent) posted gains, the largest markets Berlin (minus 21 percent) and Munich (minus 38 percent) experienced substantial declines. Larger transactions in these cities remain absent. Although office properties are generally viewed somewhat more positively again, investor skepticism toward this asset class has not entirely dissipated.

Real estate market yield development shows clear stabilization in the third quarter 2025. For office properties, aggregate net initial yield in the seven metropolitan areas remains at the prior quarter's level of 4.33 percent. The slight compression from the second quarter has not continued, and stable development is expected short-term in most of the seven metropolitan areas. Stability is also observed in the residential segment. Prime yield for apartment buildings remains at 3.51 percent in the third quarter, underpinning continued strong demand in this asset class considered secure. In the retail segment, regained stability also continues, with yields remaining at prior quarter values.

There was slight yield movement in the logistics and industrial real estate market. The yield had already increased to 4.4 percent in the second quarter, with a further rise to 4.46 percent in the third quarter. This reflects the currently weakening rental market, which has consequently reduced product supply in the investment market. However, demand for well-leased and ESG-compliant logistics products remains present. The prime yield increase should be viewed as a minor price correction rather than a trend reversal.

Investors often use government bonds as benchmarks. In Germany, the ten-year bond has risen significantly since June and has since stabilized at approximately 2.7 percent. The increase stems from the federal government's budget package and numerous planned investment expenditures that may subsequently drive prices higher. This reduced the risk premium for office real estate investment to currently around 160 basis points. However, one should not forget that in real terms, after adjusting for inflation, government bond yields shrink to approximately 0.6 percent.

Overall, the third quarter 2025 presented a differentiated picture: despite selective signals for market revival, investment appetite remains selective and driven by higher security requirements while price and financing expectations consolidate. Focus remains on residential investments and core offices in prime city center locations. Alternative sector development is gaining momentum but remains supplementary business for now. Medium to long-term success will depend on how quickly the office segment stabilizes and how sustainably investor confidence and price discovery recover in the commercial sector. For the final quarter, we expect transaction volume between €10 and €13 billion, which in the best case would lift full-year results to €37 billion, slightly above prior-year volume.

Our Capital Markets contacts:

Capital Markets & Office Investment:
Konstantin Kortmann, CEO JLL Germany & Head of Capital Markets Germany

Industrial Investment:
Diana Schumann, Head of Industrial Investment Germany

Residential Investment:
Michael Bender, Head of Residential Germany

Retail Investment:
Sarah Hoffmann, Head of Retail Investment Germany

Research:
Helge Scheunemann, Head of Research Germany

Debt Advisory:
Dominik Rüger, Senior Director, Debt Advisory Germany