Investment Market Overview Q4 2025

The German commercial real estate investment market concluded 2025 with a transaction volume of €33.9 billion – four percent below the previous year. The industry is asking: What was it then? A good investment year? Certainly not. But also not a genuinely poor one. The truth lies somewhere in between. In retrospect, not only did the exogenous geopolitical and economic framework conditions prove unstable, but the real estate market also continues to lack a sustainable trend reversal. Looking back, the sobering realization remains that the positive signals at the beginning of 2025 did not fully materialize and ultimately were only small flashes of light.

"Small is beautiful" was again the investors' motto over the past twelve months, as contrary to volume, the number of registered transactions increased by ten percent compared to 2024, while the average transaction size simultaneously decreased from €32 million to €27 million. The insight that ran like a common thread through the year remains: transactions beyond €100 million are missing. 2025 also saw comparatively little activity with 51 completions, significantly fewer than the 74 deals recorded in 2024. The buyer landscape provides an explanation. Institutional investors such as insurance companies, open-ended funds, sovereign wealth funds, or pension funds continue to hold back, and only when they venture back onto the trading floor will the investment market noticeably gain momentum.

Will they do so in the new year? The declarations of intent are certainly there, with Berlin, Frankfurt, Hamburg, and Munich – four German cities – among the ten cities named by investors in the current Emerging Trends in Europe study by ULI/PwC as having the best investment prospects. Another signal comes from European Central Bank (ECB) statistics. Bank lending to companies in the eurozone accelerated in November 2025. Financial institutions extended more than three percent more loans to firms than a year earlier, representing the strongest increase since mid-2023. If increased demand for credit can be seen as a harbinger of enhanced investment readiness, this gives cause for optimism that the real estate market, massively dependent on external capital, will benefit accordingly. This aligns with the results of the Difis (German Real Estate Financing Index), which recovered ground in the fourth quarter and thus tended back toward positive territory. Although financing rates (ten-year swap rates) rose from 2.68 percent to 2.93 percent in the fourth quarter, they remain approximately 50 basis points below their peak of October 2023. More movement in international financial and interest rate markets could come in May when US Federal Reserve Chairman Jerome Powell hands over the baton to his successor.

A significant factor contributing to the market's lack of recovery momentum in the past year is that existing holders, due to continued availability of external capital and credit extensions, have not yet had to realize book value losses, resulting in no selling pressure for many. Whether this will remain the case for all existing holders may be questioned, and this could lead to increased transaction activity in 2026.

€33.9 bn

volume of transactions in 2025

-4 %

compared to 2024

By the end of 2025, the distribution of transaction activity by asset class changed once more. While Living, with €10.2 billion invested in residential properties, care facilities, or student housing and a 30 percent share, remains clearly in first place of investor demand, interesting shifts have occurred behind it. The slight recovery in the office market observed before the quarter's end could not be confirmed in the final quarter. In the last three months of 2025, office properties worth €1.4 billion changed hands, almost 30 percent less than in the third quarter. Nobody expected a year-end rally, but the final quarter was ultimately only the third-best of the year. The absence of large transactions is particularly noticeable in the office segment. Germany's largest transaction in the fourth quarter was the sale of the Spreebogen in Berlin for a high double-digit million-euro amount. The full-year result totaled €6.3 billion with a share of just under 19 percent, achieving only fourth place among asset classes.

Due to the two largest transactions across all asset classes in October through December – the sale of the Oberpollinger department store in Munich for approximately €380 million and the Designer Outlet Center Neumünster for around €350 million – retail properties moved to second place. More than €6.5 billion was invested in this usage type throughout the year. Besides inner-city department stores and commercial buildings, the recovery is also evident in continued consistent demand for supermarkets and food-anchored specialist stores. International trade policy calmed somewhat toward year-end following the excitement and discussions surrounding US tariff policy. Retailers and logistics companies have adapted to the new realities. The logistics real estate investment market ultimately benefited from this. Properties worth €2.2 billion changed hands in the fourth quarter, more than in any other quarter of the year. With nearly €6.5 billion accumulated for 2025, the logistics-industrial sector ranks third in the asset class hierarchy. Against the backdrop of this sector's particular vulnerability to geopolitical and economic events, this result is positive despite the slight decline compared to the previous year.

Foreign investors were particularly active and responsible for nine of the ten largest deals of the year. Although some transactions by traditional institutional investors occurred in the final quarter despite general restraint, the year-long trend showed increased engagement from long-term oriented, discretionary family offices and other private structures that have both rapid decision-making processes and typically very strong equity bases. However, since these buyer groups only exceptionally deal with high three-digit prices, they cannot completely close the market gap.

Whether 2026 will bring new impulses from defense and security themes depends partly on how closely and cooperatively the state and private real estate industry will collaborate to quickly implement planned investments in infrastructure, barracks, and production capacities. However, what we consider a fundamental trend will also shape the investment market in 2026: real estate investments must rely on operational cash flow improvement to be successful. Simply betting on yield compression is no longer sufficient for value appreciation or preservation.

Number of portfolios

Volume each ≥ €100 mn

38

2024

26

2025

The seven real estate hubs (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, Stuttgart) recorded a total transaction volume of just under €15 billion in annual results. This represents a twelve percent decline compared to 2024. Their share of total German volume thus decreased from 48 percent to 44 percent. Although development varied significantly regionally, the year-end balance shows that the absence of larger office deals affects each of the seven metropolises. At least the two Rhine metropolises Düsseldorf and Cologne achieved transaction increases of 23 percent and ten percent respectively compared to 2024. Berlin remains in first place with €4.7 billion despite a significant decline from 2024. Besides Upper West as the year's largest office transaction, the capital continues to benefit from its attractiveness for residential properties. Munich follows at a distance with €2.9 billion and Hamburg with €2.3 billion. The financial metropolis Frankfurt lags significantly behind in volume terms with €1.3 billion. However, the banking metropolis's very strong office leasing year should subsequently generate more activity in the office investment market in the new year.

Year-end yield development in the real estate market shows little change, though varies by asset class. For office properties, the aggregated net initial yield in the seven metropolises fell minimally to 4.31 percent, exclusively due to an adjustment in Hamburg. The second yield movement occurred in the logistics and industrial real estate market. Following the third-quarter increase, a further ten basis point rise occurred at year-end to 4.56 percent. Compared to 2024, prime yields have thus increased by an average of 26 basis points. This price correction was confirmed by fourth-quarter completed transactions; further yield development will likely be strongly influenced by when rental markets regain momentum.

Government bond yields remain under observation as they often serve as investor benchmarks. At the end of 2025, ten-year German government bond yields rose to 2.9 percent. Concerns about rising government debt caused prices to fall across all industrialized countries, particularly in Germany. Yields rose accordingly. This reduced the risk premium for office real estate investment to approximately 146 basis points, down from 189 basis points at end-2024. Nevertheless, on an annual basis, investors made nominal losses of more than one and a half percent with German government bonds due to price declines. In such a (theoretical) comparison, real estate performed significantly better, as investors could achieve nominal total returns of eleven percent with fully let prime office properties from January 1, 2025, to December 31, 2025. Even after adjusting for inflation, a clearly positive real return remains.

Overall, the 2025 summary remains: it was a volatile investment year. The hoped-for continuation of recovery at year's beginning did not occur. Nevertheless, we expect increased investment activity in 2026, particularly against the backdrop of improving economic conditions and stronger rental market demand. We will only see increased investor risk appetite in exceptional cases, while interest in alternative investments such as infrastructure and data centers grows. On an annual basis, we forecast transaction volume of up to €40 billion.