Asset class of residential real estate in the lead – transaction volume dips slightly

- Transaction volume of €8.4 billion – down slightly versus 2024  
- Number of transactions up 40 percent to 200 – average deal size is smaller
- Significant increase in the share of international investors

Germany’s institutional multifamily investment market (upward of 50 units) delivered a transaction volume of €8.4 billion in 2025, slightly lower than the year-earlier figure (2024: €8.8 billion). With a market share of 25 percent, residential remains the strongest asset class on the German real estate investment market. At the same time, transactions have increased by more than 40 percent to 200 deals. The average deal size contracted to around €42 million (previous year: €62 million). The decline is exclusively attributable to the lower volume in portfolio transactions (down 22 percent to €4.1 billion). With a volume of €4.3 billion, single-asset transactions reached a three-year high (up 25 percent). These are the conclusions drawn from current analysis prepared by the global commercial real estate services company CBRE.

The increase in the volume traded in single-asset transactions shows that many portfolio holders concentrated on their assets’ performance in 2025. Along with raising the cash flow, assets were selectively streamlined in terms of their quality. Portfolios featuring largely uniform quality offer better prospects for operational growth.

“A clearer strategic direction also facilitates argumentation in the context of financing banks. The lower level of more major portfolio adjustments is explained by less pressure to sell than anticipated at the start of the year. Loans were mainly serviced from the cash flow of rental income.”
Stefan Wilke, Head of Residential Investment Germany at CBRE

Reticence still prevails on the buyer side: “Global political uncertainties and financing costs that rose in the last quarter, more stringent equity requirements and uncertainty about in the pricing process continue to cause a bid-ask-spread issue in the institutional transaction market,” explains Michael Schlatterer, Managing Director Residential Valuation. However, prime assets continue to fetch adequate prices due to the supply shortfall, as evidenced by a stable prime yield of 3.4 percent compared to the previous year.

The quality of the properties traded improved slightly, as evidenced by the average price per floor area that increased from €1.900 per sq m in 2024 to almost €2.300 a year later. Forward deals, i.e. investments in developments, only captured a low proportion of the transaction volume. Compared to 2024, forward deals advanced by a mere three percentage points to 34 percent, corresponding to €2.9 billion. Noteworthy is the fact that, of the 51 forward transactions, one third was accounted for by forward funding:

“Forward funding is no longer just a means for public housing associations to give developers financial backing, but increasingly also a tool used by the private sector and international players. Forward funding enables them to gain secure an entry into the German housing market.”
Jirka Stachen, Head of Research Consulting Continental Europe at CBRE Germany

Developers, for their part continue to struggle with financing problems caused by the high construction costs and the financial hurdles set in place by banks.

Extremely diverse investor and risk environment
The run of many investors on value-add is ongoing: 16 percent more was invested in this risk class (€3.7 billion) compared to 2024, and the share in the transaction volume now stands at 44 percent (up eight percentage points). However, core/core plus recorded a decline of more than 20 percent in the absolute transaction volume (€4.6 billion, with a share of 54 percent): “Value-add buyers essentially pursue two strategies: refurbishment and the subsequent leveraging of rent upside potential or dividing up properties and then selling them on individually. This strategy only works in locations with no stringent rules and regulations on dividing up properties, with real estate already subdivided into condominiums,” Stachen explains. In many larger cities, this strategy is barred by the local authorities, also by way of designating areas for environmental protection. 

International investors were more active again on the German market in 2025, lifting their share from 24 percent in 2024 to 35 percent in 2025. They mostly focused on large, high-quality tickets where availability is limited. By contrast, the sweet spot of most investors proved to be considerably lower between €30 and 50 million.

“The investor landscape is extremely diverse. There is still plenty of value-add capital, but this will only generate the required returns if there is potential for creating value and attractive leverage – and both are currently in short supply in the market. Foreign core and core plus capital is, however, extremely picky as far as quality is concerned,” Wilke explains. “In addition, larger foreign family offices have also engaged in the market, alongside institutional market players.”

The largest investors comprised asset and fund managers with €1.7 billion, followed by municipal housing associations with €970 million and non-listed real estate companies with €702 million. The largest listed real estate companies, on the other hand, predominantly operate on the seller side – a net sales volume of €400 million marks the lowest figure since 2020, however. Before then, they had been reducing their real estate assets to the tune of up to nearly €2.5 billion a year. “There are many indications that this investor group has now concluded its major portfolio adjustments and that they may return to being net investors again in 2026,” Schlatterer comments.

Outlook for 2026
“A marginal market recovery can be expected in 2026. Streamlining in the commercial portfolios held by insurance companies and funds has reached an advanced stage, meaning that capital for reallocation to residential real estate should be available. Furthermore, construction activity has picked up slightly again and should bring new properties to the market,” Schlatterer predicts. 
“The increasingly challenging task of raising investor funds, particularly core capital, will slow the transaction speed in 2026 as well. This being the case, we anticipate a growing number of transactions – particularly in the core segment – concluded by individual clients with decision-making powers who have not, for instance, been adequately served by their investment managers in recent years and who have now undergone repositioning. Interest in forward purchases will also remain keen and is likely to accelerate. All told, a slight increase in the transaction volume by up to €10 billion appears realistic,” Wilke concludes.