Investment Market Overview Q3 2026

The upward trend visible in the German investment market since the end of 2025 lost momentum again in the third quarter. At around €23.9 billion, transaction volume after nine months stagnated at the prior-year level. At the half-year mark, by contrast, it had still been up 15 percent. Arithmetically, the third quarter accounted for roughly €6.3 billion, compared with roughly €8.6 billion in the same quarter last year.

In September, the European Central Bank raised its key interest rates by 25 basis points for the second time this year, bringing the deposit facility rate to 2.50 percent. Euro area inflation had previously risen to 3.3 percent in August, driven mainly by high energy prices following renewed tensions in the Middle East. Bond yields have also risen. Ten-year German Bunds have since yielded around 3.5 percent, while the yield on ten-year US Treasuries briefly exceeded five percent, its highest level since October 2023.

The renewed rise in interest rates is tightening the conditions for real estate investment, as the spread between property yields and the Bund, regarded as the lower-risk benchmark, remains narrow in many segments. Well-capitalised players that do not depend on debt financing at current high borrowing costs benefit in particular. For the majority of investors, however, the risk premium on real estate investments is significantly too low, which is why processes already under way or transactions in prospect have initially been put on hold.

This assessment is also reflected in investors’ current perception of risk. According to a recent Bank of America survey, concerns about developments in the bond markets and rising inflation expectations are coming more strongly into focus, while geopolitical risks are losing importance.
There are growing signs that the ECB will continue to tighten monetary policy. A year-end rally in the German real estate investment market is therefore not to be expected in the final quarter. The forecast for full-year 2026 now stands at €35 billion to €37 billion.

After nine months, single-asset transactions reached a volume of €17.1 billion, three percent above the prior-year figure. At the half-year mark, the increase had still been 29 percent. For portfolio transactions, by contrast, the decline versus the prior-year period narrowed from around ten percent at mid-year to just under six percent. Transaction volume here amounted to €6.8 billion after nine months.

€23.9 bn

volume of transactions in Q1-3 2026

0%

compared to Q1-3 2025

For both portfolios and single assets, volume continues to be driven by a very large number of mid-sized and smaller transactions. Large deals above €100 million, on the other hand, have become rarer: ten were recorded in the third quarter, compared with 16 in the second quarter and 19 in the first. Notably, eight of the ten large transactions were made by investors headquartered outside Germany. This indicates that foreign investors take a more positive view of the German real estate market than the domestic conditions would suggest.

After nine months, transaction volume in the Big 7 combined stands at €8.9 billion, 15 percent below the prior-year result. Their share of the nationwide volume fell to 37 percent.

Developments diverged across the individual cities: Hamburg increased its transaction volume by 25 percent year on year, and Düsseldorf by 17 percent. Berlin still tops the ranking with €2.4 billion but recorded a year-on-year decline of 34 percent. The drop was even steeper in Stuttgart, where transaction volume fell by around 60 percent, from €620 million to €250 million.

Following further insolvencies among project developers in recent months, there is debate over whether the industry faces another broad wave of insolvencies. However, JLL analyses show so far that since 2024 only eleven percent of the registered sales volume was attributable to financial pressure from lenders, for example because the required debt capital was not available in sufficient amounts at refinancing, or because its cost had risen too sharply.

Taking the office market as an example, a refinancing gap of €4 billion also exists in 2026. According to current forecasts, this gap should close from 2028 onwards for office properties and, in all likelihood, for all other asset classes as well. Despite rising interest rates, debt capital remains available in considerable volumes. In the first half of 2026, new lending in commercial real estate finance at the twelve major lenders analysed by JLL rose by 15 percent to €17 billion.

Number of portfolios

Volume each ≥ €100 mn

17

Q1-3 2025

20

Q1-3 2026

Nevertheless, global uncertainty is also making lenders more cautious in the financing markets. The key factors are seen as the further course of the Middle East conflict, possible additional ECB rate hikes, and the security of energy supply. Most institutions are sticking to their annual targets but are monitoring their loan portfolios more closely than before.

The commercial real estate finance market is in a phase of qualitative consolidation with a pronounced “flight to quality” dynamic. Lenders are becoming increasingly selective in their choice of sectors and market segments, while high loan-to-value financings tend to decline owing to limited debt service capacity. The stabilisation of interest rates at a structurally higher level is shaping the new market equilibrium and durably raising refinancing costs.

The gradual market consolidation observed since 2023 is not yet complete. In large parts of the market, the necessary repricing is still outstanding, while equity remains scarce and traditional investors have reduced their volumes or withdrawn. In addition, many existing loans are still calibrated to the interest rate and valuation levels of the zero-interest-rate era, so the adjustment will only occur at refinancing.
At the same time, there are constructive approaches to solutions and a selective willingness to refinance convincing concepts. Attractive growth niches exist in specialized asset classes such as retail warehouses, logistics, student housing, and the hotel sector. Accordingly, both demand and transaction activity are robust there.

After nine months, living remains the strongest asset class with a transaction volume of €7.9 billion. That represents one third of total volume and an increase of three percent compared with the prior-year period. The logistics/industrial asset class grew by four percent to €4.4 billion. It reached an 18 percent share, putting it ahead of office properties again.

In the office sector, market developments reflect not only the current economic challenges but also ongoing structural transformation and the question of the office’s role in the age of AI.

Yield developments in the third quarter of 2026 continue to be shaped by the challenging interest rate environment. Compared with the previous quarter, prime yields have risen in nearly all asset classes. For offices in the seven major cities, the prime yield now averages 4.59 percent, 13 basis points above the previous quarter. For logistics/industrial, it likewise rose by 13 basis points to 4.69 percent. For multifamily housing, as well as for retail properties and commercial buildings in city centres, the prime yield rose by ten basis points each, to 3.61 percent. Only the yields on shopping centres and food-anchored retail parks remained stable.

As a result, the spread between property yields and the ten-year Bund remains narrow in many segments. It should be noted that part of the rise in government bond yields is attributable to a fiscal risk premium, rather than to interest rate or inflation expectations alone. For long-term investors holding properties with indexed leases, real estate nevertheless continues to offer a real yield advantage over nominal bonds. Positive leverage effects in real estate financing, however, remain virtually ruled out in the current interest rate environment. Value creation is therefore concentrated on active asset management, rental growth potential, and decarbonisation pathways.

The market is moving from a recession into a restructuring phase. Whether the signs of a limited revival seen in the first half will continue will become clear in the coming weeks. What matters now is the further course of interest rates (the ECB’s next rate decision is on 29 October) and the question of whether and when buyers and sellers will reach a new price consensus at the higher yield level.

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Disclaimer:
This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report.