Investment Market Overview Q2 2026

The increase in investment activity visible since late 2025 continues: the first quarter of 2026 showed clear signs of recovery in the German investment market. Defying many expectations, the continuation of the Iran war into the second quarter — and the associated rise in inflation and interest rates — has not derailed this fragile recovery. At approximately €17.6 billion, transaction volume at the half-year mark of 2026 remained a steady 15 percent above the prior-year level. The broader environment remains volatile, and many transactions that were contemplated or initiated continue to fall through at various stages of the process. The gap between asking prices and the prices buyers are willing to pay has, if anything, widened further in the wake of rising interest rates. That said, liquidity is not the constraining factor on the German real estate investment market — investor appetite remains fundamentally intact.

This picture is consistent with the latest credit statistics for the eurozone, which are sending positive signals. While strong momentum appears unlikely given the prevailing uncertainty, credit volumes to private-sector companies grew by 3.9 percent year-on-year in May. Notably, medium- to long-term loans — which tend to be more closely associated with corporate investment activity — represent a particularly encouraging development. In parallel, the availability of debt financing in the real estate market is also improving. In 2025, new lending by twelve major institutions analysed by JLL already rose by 27 percent to €37 billion, and forward-looking figures for 2026 point to a further increase.

Should the geopolitical situation continue to stabilise — as current signals suggest — further interest rate hikes by the ECB may well be taken off the table. This would allow the investment market to sustain its positive trajectory. Against this backdrop, we continue to project full-year 2026 transaction volume in the range of €35 billion to €40 billion.

A stark divergence between single-asset transactions and portfolio sales persists. The latter show no sign of a trend reversal, remaining approximately ten percent below the prior-year level. Portfolio offerings frequently bundle assets of widely varying quality in terms of location and specification — a proposition that currently attracts only a limited pool of risk-tolerant investors. It is telling that virtually all portfolio transactions originated from the living sector, including the two largest deals of the past quarter, each with transaction values in the mid-three-digit million euro range.

€17.6 bn

volume of transactions in H1 2026

+15 %

compared to H1 2025

Single-asset transactions, by contrast, paint an entirely different picture, posting robust growth of approximately 29 percent compared to the prior year. Volume is largely driven by a high number of mid-sized and smaller deals. Nevertheless, a number of significant large-scale transactions did take place — which may come as something of a surprise given the increasingly difficult headlines: 21 deals each exceeding €100 million were concluded across the first half of the year, distributed almost evenly between the first and second quarters. Transactions already in process were largely completed despite the increasingly adverse conditions. Yet the sale of very large-volume assets — particularly in the office segment — remains challenging, as illustrated by the example of the Opernturm in Frankfurt. This is one of the reasons why the share of the seven major metropolitan markets in total German transaction volume has stagnated at 37 percent.

There are also encouraging signals from several major cities. In Berlin, a strong second quarter helped narrow the year-on-year decline significantly to 17 percent. With a volume of just over €1.6 billion, the capital reclaims the top position, closely followed by Hamburg at just under €1.6 billion. The Hanseatic city recorded the strongest year-on-year growth among the major markets, posting a gain of nearly 60 percent. Cologne and Düsseldorf also registered substantial increases of 42 and 37 percent respectively. Frankfurt's investment market remains decidedly subdued, with a half-year result of only €530 million — a further 20 percent decline on what was already a very weak first half of the prior year.

The breakdown by asset class shows no material change. As in previous quarters, the living sector continues to assert itself as the leading asset class at mid-year 2026, underpinned by persistently strong demand. This is further evidenced by the fact that four of the ten largest transactions of the period belong to this category. In aggregate, the living sector accounted for €5.8 billion, representing a 33 percent share of total volume. Conditions in the office investment market remain challenging, particularly for core product. Demand is heavily concentrated on modern, ESG-compliant assets in established locations, with energy efficiency, low operating costs and flexible space concepts serving as decisive criteria. Prospective buyers continue to act with considerable selectivity. At the same time, the supply of genuinely prime product remains limited.

Long-term oriented institutional holders such as insurance companies and pension funds are under no pressure to sell and continue to hold their assets. This is confirmed by a recent JLL analysis: only eleven percent of registered sales volume in the period 2024 to Q1 2026 was driven by financial pressure from debt providers — excluding insolvencies — arising, for example, from insufficient debt availability at refinancing or prohibitively high financing costs. The picture looks somewhat different for value-add assets. In this segment, JLL is already observing a relatively high level of activity. Declining prices for older existing buildings are creating opportunities for repositioning, ESG upgrades and change-of-use strategies. This segment should continue to generate opportunities for private equity investors and project developers with the requisite expertise and capital to execute asset transformation throughout the remainder of the year.

In the half-year statistics, office transaction volume totalled just under €3.1 billion, with no revival materialising in the second quarter. On the contrary, volume declined by a further 16 percent compared to the first quarter. Just behind offices, the logistics and industrial segment recorded a contrasting performance, with a markedly stronger second quarter. Total first-half volume reached €2.9 billion, representing an increase of approximately 22 percent year-on-year. The geopolitical easing in the Gulf region and the stabilization of supply chains appear to have restored confidence among investors in this segment as well.

Number of portfolios

Volume each ≥ €100 mn

13

H1 2025

14

H1 2026

Looking at the buyer side, international investors accounted for a notably high 44 percent share of transaction volume (€7.9 billion) at the half-year mark — elevated by historical comparison. On the seller side, the picture is even more pronounced: domestic holders accounted for 65 percent of disposals. The net balance confirms that international investors continue to build their exposure to Germany in the current market phase. The buyer universe in the first half was broad. Asset and fund managers remain the largest investor group, maintaining a consistent 35 percent share of transaction volume. Private investors also held steady at eleven percent, while public sector activity has moderated, with its share declining to just under nine percent. Open-ended public funds have been under particular scrutiny in recent months due to mounting outflows, and their current acquisition activity reflects this — they appear primarily in the seller statistics.

The defining feature of the German investment market in the second quarter of 2026 was a rise in office yields, while prime yields across all other asset classes held broadly steady at their prior-quarter levels.

The average prime yield for office properties across the seven major metropolitan markets increased by 15 basis points in the second quarter to 4.46 percent. This upward movement was observed across all cities, with adjustments ranging from ten basis points in Cologne, Munich and Stuttgart to 20 basis points in Berlin, Düsseldorf, Frankfurt and Hamburg. This development signals that the market is now pricing in higher capital costs and moving away from the wait-and-see posture that characterised previous quarters. This trend is not confined to core assets. Significant yield expansion was also recorded in higher-risk segments: for assets in secondary locations and of only average building quality, the average yield across the seven major markets rose by approximately 34 basis points to 7.82 percent — indicating that investors are once again demanding higher risk premiums for the risk they assume.

The sustained pressure from the changed interest rate environment — with government bond yields remaining elevated and financing costs having risen — is compelling market participants to recalibrate their pricing expectations. The need to offer an attractive risk premium relative to alternative investments such as ten-year German Bunds is intensifying the pressure on sellers to adjust. The previously common strategy of simply sitting out the cycle is becoming increasingly difficult to sustain under current financing conditions, particularly given that a refinancing gap of approximately €5 billion is projected for the German office investment market over the current and coming year combined. It is reasonable to expect that transactions over the remainder of the year will increasingly take place at this new, higher yield level, once a fresh pricing consensus between buyers and sellers has been established.

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