VICTOR Prime Office

Market commentary Q3 2025

The German office real estate market continued to develop cautiously positive in the third quarter of 2025. In line with this trend, the Victor Prime Office Performance indicator increased by +0.8% to an indicator level of 171.2 points, which represents a weaker performance than the previous quarter's 1.2% but confirms the slight recovery tendencies. All five observed metropolitan areas, Berlin, Dusseldorf, Frankfurt, Hamburg and Munich recorded an indicator increase, while prime yields stagnated at all locations.

The strongest growth in the third quarter was achieved by Dusseldorf's banking district with an increase of 1.1% to 154.8 points. The driving forces behind this development proved to be rising rental prices both in the premium segment and outside this category. Munich's city centre follows with an increase of 0.9% to 193.4 points. The Bavarian capital particularly benefited from the strongest increase in prime rent, thereby reinforcing its dominant market position. Hamburg's top location recorded an index increase of 0.8% to 186.4 points. This growth primarily stemmed from the reduction of vacancy rates in the prime segment as well as pronounced rental increases across the broad spectrum, while prime rent remained constant compared to the previous quarter. Berlin's premium locations and Frankfurt's banking district jointly occupy the last position with respective quarterly increases of 0.6%. The current index values accordingly stand at 180.5 points in Berlin and 152 points in Frankfurt. Both locations show only minimal rental price modifications in both the premium and broad segments, while in the Main city prime rents stagnated completely.

The annual performance across all locations also shows a positive result of 3.2% (comparison of indicator level Q3 2025 to Q3 2024), following 2.8 percent in the previous quarter. Munich leads with 6.3% followed by Düsseldorf with 2.9%, thanks to the good quarterly result. Frankfurt and Hamburg are tied at 2.8% each, while Berlin forms the rear due to weak developments in the first two quarters of 2025 (-0.4% and -0.6%) with 0.5%.

The transaction volume in the office investment market reached approximately 1.5 billion euros in the five real estate hubs under consideration, representing the best quarterly result of the past three years. However, large deals remained in short supply, and the expected closures of prominent landmark properties did not materialize in the third quarter. In markets with high-quality properties in the small to medium volume range such as Hamburg, business is running better, with international investors also showing interest here. Should the currently ongoing transactions be completed, Hamburg could experience renewed yield compression.

In the office leasing market, space turnover in the third quarter was restrained compared to previous quarters. Nevertheless, cumulative space turnover in the five cities after three quarters stands at 1.73 million square meters, slightly above the previous year's period of 1.69 million square meters. Frankfurt benefited from prominent large-scale leases in the first half of the year, which however were not yet sufficient to sustainably restore investor confidence.

Overall, the third quarter brought little change from the second quarter. It appears that in many cases bids still do not meet seller expectations, and this has also noticeably extended process times overall and across all size categories. Many market participants positioned themselves in a wait-and-see manner and are orienting their activities toward further signals from the leasing, fundraising and transaction activity segments.

A remarkable turning point is emerging on the supply side. Europe-wide, the low point in completions has likely been reached. Construction activity is at historically low levels after numerous projects were postponed or stopped. This wave of postponements should gradually subside. However, a noticeable catch-up effect is not expected until 2027 due to market inertia. The consequently expected scarce completions in the coming year will likely support price stability of high-quality properties, so that these should hardly lose value even in the event of an economic downturn. Despite the prevailing impression of a currently stagnating market, fundamental indicators suggest that in the case of positive feedback from investment markets to user demand, a gradual market revival appears possible.

Indicator level Q3 2025 
171.2 Points
Performance Q2 2025 / Q3 2025
0.8%

Indicator level Q3 2025 
180.5 Points
Performance Q2 2025 / Q3 2025
0.6%

Indicator level Q3 2025 
154.8 Points
Performance Q2 2025 / Q3 2025
1.1%

Indicator level Q3 2025 
152 Points
Performance Q2 2025 / Q3 2025
0.6%

Indicator level Q3 2025 
186.4 Points
Performance Q2 2025 / Q3 2025
0.8%

Indicator level Q3 2025
193.4 Points
Performance Q2 2025 / Q3 2025
0.9%

Concept

Property markets exhibit cyclical fluctuations from which even the prime German prime office locations are not immune. The volatility of price performance emphasizes all the more how important a transparent market indicator is. In this context, JLL analyses the price development in the prime office locations of the cities of Berlin, Dusseldorf, Frankfurt, Hamburg and Munich. Holders of real estate port-folios and potential investors should be given the oppor-tunity to obtain greater transparency for clearly defined submarkets and identify developments and trends more quickly so they can act accordingly. The indicator analyses the following submarkets, which have a total area of approximately 12 million sqm:

• Berlin – Charlottenburg / Mitte / Potsdamer Platz und Leipziger Platz

• Dusseldorf – Banking district

• Frankfurt – Banking district

• Hamburg – City centre

• Munich – City centre

In these submarkets, the price development of the lettable office space stock is analysed. The analysis identifies the changes in value of the office space stock and reflects the performance (capital growth) over time. In the overall analysis (VICTOR Top-5), the price development of the abovementioned prime office markets was averaged (unweighted). As a result of the differing amount of existing office space and the differing value levels in the individual submarkets, these values were considered with a 20% weighting in the Top-5 Indicator.

Since 31 December 2003, the indicator has been calculated on a quarterly basis and will continue to be updated on a quarterly basis in the future. The short observation intervals provide an adequate picture of short-term market fluctuations and a realistic portrayal of current market trends. In this regard, the Valuation Performance Indicator VICTOR is a valuable benchmarking tool and a trend barometer for the analysed submarkets.

Methodology

The market valuation of the submarkets, based on the effective date, is carried out according to international valuation standards and is based on the JLL database. The assumptions in the model relate to real market data as well as the assessment of JLL professionals. In the model, we refer to an assumed fixed space inventory in the submarkets, actual vacancy rates as of the effective date and different quality proportions. This ensures a real-istic picture of the letting situation and temporal compara-bility of the indicator values. The calculation is based on a discounted cash flow model, which takes into account all valuation parameters relevant to market standard.

Inflation expectations, as well as the market rental growth anticipated by JLL, are explicitly considered in the analysis. The growth of the contractual rents was adjusted on the basis of market standard, assumed indexation regulation and the real inflation rate. The market rents of the prime office locations are analysed by JLL on a quarterly basis and incorporated into the model. The contractual rents are determined over a historic time series, so that a statement about the respective over / underrent status can be made. In addition, explicit ongoing building costs, letting costs and rental incentives as well as estimated void and reletting periods are considered in the cash flow.

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Authors
Dr. Andreas Dickert, Team Leader Operations Management
Ines Lippolt, Director Operations Management
Contact us
Our contacts:
Valuation:
Ralf Kemper, EMEA Head of Office & Retail, Lender Service
Helge Scheunemann, Head of Research Germany
Research:
Helge Scheunemann, Head of Research Germany

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