German real estate investment market drops below the 2024 level despite year-end rally

- Transaction volume of €33 billion, down five percent compared to 2024
- Market activity constrained by different price expectations
- Disparate market: very pronounced individual trends in the various asset classes 

Boosted by the strong year-end rally, Germany’s real estate investment market delivered a transaction volume of €33 billion in 2025. Although this result fell five percent below the 2024 volume, a slow recovery is in evidence as €18.6 billion was invested in the second half of the year, a good €4.4 billion more than in the first six months. Residential took its place as the strongest asset class, followed by logistics, retail and office. These are the conclusions drawn in a current analysis prepared by the global commercial real estate services company CBRE.

“The dynamic final quarter shows growing investor interest in German assets.”
Marcus Lemli, Head of Investment at CBRE Germany

“The discrepancy between buyer and seller price expectations posed the greatest obstacle to more brisker investment activity,” Lemli explains. Prime net initial yields nevertheless held steady in most asset classes. 

The 2025 year generally turned out to be a very challenging one for the German economy. However, with economic growth ticking up by 0.1 percent, the year the year stands out positively from the two previous years of recession. Owing to US trading policy and the introduction of extensive US tariffs, exports above all to that economic region declined significantly although there was less of a downturn in exports overall than expected. Furthermore, corporate investment proved to be a great deal more stable. By contrast, industrial production, along with the construction industry, nosedived in the wake of the sharp decline in residential investment. Despite this difficult environment, the labor market remained fairly stable, mainly as further job losses in the manufacturing industry were virtually offset by gains in the service sector, and here especially in the public sector. 

Improvement in framework conditions
In 2026, and above all in 2027, the German economy should shake off its economic doldrums, especially if the fiscal easing anticipated takes effect. Extra spending planned for defense and infrastructure measures will significantly boost government investment while additional defense expenditure will also translate into higher government consumption. Exports should also return to the path of expansion over the course of 2026, particularly as global trade and export demand are also set to grow substantially. A decisive factor in this context is that the German economy sharpens its competitive edge in the international arena through vigorous and urgently needed reforms. Private investment in residential construction is also showing the first tentative signs of recovery. Wages and salaries trending up sharply, accompanied by a steady improvement in the labor market, are providing support for households’ real disposable income and thus for a moderate increase in consumer spending. Against the backdrop of growing capacity utilization, companies are also upping their investments again although the impact will only filter through in 2027. Additional government investment is resulting in interest rates rising, especially at the long end of the yield curve. At the start of 2026, the yield for German Bunds with a residual period of more than nine to ten years stood at 2.87 percent, a good 0.4 percentage points above the year-earlier figure. Stabilization at this level, with a tendency to even higher figures, can be anticipated over the course of 2026. Despite the ECB lowering the key rates during the year now ended, the yield curve is steepening, which is likely to limit real estate yield compression in the future.

“Accordingly, focusing on the revenue side is becoming increasingly important for real estate investors in the current real estate cycle. Proactive asset management that strategically realizes the respective opportunities at market, location and property level is the key to long-term success.”
Dr. Jan Linsin, Head of Research at CBRE Germany

Focus on core
The year 2025 saw an increase in safe-haven-oriented investments in the core segment (up 12.5 percent to €9.6 billion – share of 29 percent). The main emphasis here was placed on office and hotel properties. “Office in particular is evidencing an even stronger differentiation in terms of top location and top quality,” Lemli states. Core plus and value-add nevertheless declined across the entire market although the picture varied depending on the asset class. “Market activity in some asset classes was braked by the lack of property, especially in the segment of value-enhancement-oriented investment strategies,” Lemli explains. In general terms, opportunistic investments remained at the previous year’s level as opposed to the commercial segment (above all retail and logistics) that achieved growth of 20 percent in this risk class.

More – but smaller – transactions
Large-scale deals were thin on the ground in 2025 as they were problematic against the backdrop of the majority of risk-averse investor strategies and the financing environment. A sum total of only 49 deals were recorded above the 100-million-euro mark in 2025, 16 of which in the final quarter of the year (four in the residential and twelve in the commercial segment). The volume invested in portfolio acquisitions dropped 24 percent in a year-on-year comparison, achieving a proportion of only 29 percent in the transaction volume. While investors sat on the fence in the large-scale segment, deal sizes between €20 and 50 million grew substantially by just under a third, accounting for almost half of the overall volume. As a result, transaction numbers climbed by 17 percent to around 1,390 deals compared to 2024, with the deal size averaging €24 million.

Asset and fund managers supplementing their portfolios
The strongest net buyers in 2025 consisted of asset and fund managers who invested €4.2 billion more than they sold, along with private investors and family offices (€1.3 billion on balance) and real estate companies (€1.2 billion on balance). The public sector also significantly ramped up its exposure to the German real estate market, predominantly through acquisitions of residential properties (€1.1 billion on balance). By contrast, the group divesting assets included property developers as usual and most especially listed property companies and REITs (minus one billion euros on balance). 

As regards international investors whose share rose slightly by three percentage points to 45 percent, a good fifth of the investment volume came from European countries outside Germany (a percentage similar to 2024), with another 14 percent from North America (up 23 percent measured by absolute transaction volumes against the year-earlier result). “Despite the challenges posed by the overall economy, Germany holds its position as one of the most important target markets for international investors. Along with market size, international investors are keeping a close watch on the economic recovery taking shape that, thanks to the fiscal package and with exports rising further in the months ahead, will enable more growth, especially in the medium term,” Linsin emphasizes.

Asset classes differing significantly
Multifamily housing (upward of 50 units) showed volumes in a marginal downtrend (down four percent to €8.4 billion), due above all to the low level of construction and the resulting lack of property for core investors, as well as to portfolio holders making significantly less adjustments to their portfolios compared to 2024.

In terms of logistics properties, the general trend toward reallocation into this asset class is holding steady, with the lack of adequate value-add product paired with weaker occupier demand due to the state of the economy acting as a constraint on investment activity. The transaction volume in this segment shed 14 percent to €6.6 billion.

Thanks to twelve large-scale transactions over the course of 2025, each of more than €100 million, retail real estate recorded slight growth (up two percent to €6.4 billion). Among other deals, the Porta-Portfolio takeover by XXXLutz, the disposal of Oberpollinger in Munich, the sale of the Designer Outlets in Neumünster and in Berlin, as well as the Gropius Passagen and several grocery-anchored real estate portfolios, figured as the most prominent transactions in this segment.

The office segment revealed an ongoing strategic optimization of existing portfolios, coupled with a sustained recalibration of the new price level in line with the market, all of which prevented greater transaction momentum (down 11 percent to €5.5 billion). Nevertheless, seven large-scale deals totaling around €1.5 billion were recorded, five of which by German (institutional) investors. “Core investors are increasingly returning, and a large pipeline holds promise of this asset class staging a comeback, especially seeing as rents continue to rise particularly in the top locations and new build activity is set to decline significantly in the medium term owing to changed framework conditions,” Lemli states.

By comparison, hotel and healthcare properties achieved considerable growth compared to 2024. Hotels, for instance, saw an increase of 38 percent to €1.9 billion. Healthcare real estate advanced by 18 percent to €1.2 billion, determined in particular by the City of Hamburg acquiring a care home portfolio at the start of 2025.

Outlook for 2026
“We anticipate further gradual recovery in the real estate investment market. Given the well-filled deal pipeline, including various very big landmark transactions that, when implemented, could prove to be an initial fillip for the local market, a transaction volume of between €35 billion and €40 billion can be expected in 2026,” Lemli says in anticipation. “Furthermore, the importance of real estate as a safe haven may be given a boost from the growing uncertainty of investment alternatives such as shares and bonds.

“While prime yields will tend to stay stable, total returns will be driven by rising rent, especially in markets and asset classes where property is scarce and demand strong, which applies most particularly to prime office in core locations, residential and the big box logistics segment,” says Sandro Höselbarth, Head of Valuation & Advisory Services Germany at CBRE. “Beyond prime property, rising purchase price returns can be expected,” Linsin adds.