VICTOR Prime Office Q2 2025

Market commentary Q2 2025

In the second quarter of 2025, the Victor Prime Office Performance Indicator rose by 1.2% to a new level of 169.9 points, representing slightly stronger growth than in the first quarter of the year, when it rose by 0.4%. For the first time in three years, falling prime yields in Munich, Dusseldorf, and Hamburg reinforced the positive rental effects and contributed to the rise in the indicator. Except for Berlin, all cities showed positive performance.

*Total Return: observed annual performance of the indicator plus the expected returns on the cash flow (net-initial yield of the previous year)

The winner in the second quarter is undoubtedly Munich city centre, with a performance jump of +3.5% to 191.6 points - following a 10 basis point reduction in the prime yield. In addition, the location is recording strong rental price increases. With a performance increase of 1.8% to 153.1 points, Dusseldorf's banking district came in second place. As in Munich, both the reduction in the prime yield (minus five basis points) and positive rental effects were decisive factors in this development. A reduction in the prime yield of 5 basis points was also observed in Hamburg. However, prime rents remained unchanged here, so that the indicator increase in the Hanseatic city was slightly weaker than in Dusseldorf at +1.0% to 185 points. The Frankfurt banking district stagnated at 151.1 points (+0.1%) due to a lack of impetus from the investment market and conflicting rental effects: While prime rents in the Main metropolis rose sharply, rent levels outside the top-quality areas declined. Berlin's prime locations are the only ones to show negative performance again. The indicator fell by -0.6% to 179.5 points. With prime yields unchanged, negative rental price effects led to this development.

The good quarterly results also have a positive impact on Victor's annual performance across all locations. It rises by +2.8% (comparison of indicator level Q2 2025 to Q2 2024), which is stronger than in the previous quarter (+1.5%). Here too, Munich ranks first with +5.7% due to its strong quarterly results. Frankfurt achieves an annual performance of +2.5%, closely followed by Hamburg with +2.2% and Dusseldorf with +2.1%. Berlin brings up the rear with +0.8%.

The German office property market showed encouraging signs of stabilisation in the first half of 2025, with both investment and rental activity showing only moderate growth compared to the same period last year. Transaction volumes in office real estate reached €1.6 billion, thanks to a strong first quarter in the five real estate strongholds under review, representing an increase of 14.3% compared to the first half of 2024 (€1.4 billion). The rental market also proved resilient, with total take-up of 1.2 million square metres in the five largest German cities, up 9.1% year-on-year.

While the recovery is progressing at a moderate pace, investor sentiment has improved significantly, partly due to the ECB's interest rate cuts in the first quarter of 2025. This is reflected both in a rising number of interested parties in ongoing bidding processes and in the cautious return of various investor groups. Although equity-rich investors such as family offices dominate, institutional investors are also returning, with a high proportion coming from the international arena. Premium office properties in central locations remain the focus of investor interest. Cautious hopes for a revival of the investment market are supported by expectations of continued growth in prime rents, although transaction volumes are likely to remain below pre-pandemic levels for some time to come.

Indicator level Q2 2025
169.9 Points
Performance Q1 2025 / Q2 2025
1.2%

Indicator level Q2 2025
179.5 Points
Performance Q1 2025 / Q2 2025
-0.6%

Indicator level Q2 2025
153.1 Points
Performance Q1 2025 / Q2 2025
-1.8%

Indicator level Q2 2025
151.1 Points
Performance Q1 2025 / Q2 2025
0.1%

Indicator level Q2 2025
185.0 Points
Performance Q1 2025 / Q2 2025
1.0%

Indicator level Q2 2025
191.6 Points
Performance Q1 2025 / Q2 2025
3.5%

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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