German investment market with increase in turnover at the start of the year

With an investment volume of around € 2 billion, residential is once again the asset class with the highest turnover in the German real estate investment market. Although the previous year's result was missed by 22%, the start of 2025 was marked by several large-volume package sales, some of which resulted from portfolio adjustments by larger funds and drove earnings up significantly accordingly. "The first quarter of 2026 shows that the market is also functioning better across the board. With around 70 registered transactions, the highest number since 2022 was reached. This is a clear indication that the transaction pipeline is not only filling up, but also regularly results in closings. Especially in times when liquid asset classes are subject to significant fluctuations, residential portfolios in particular can be a stabilizing building block in the investment portfolio," Marcus Zorn explains.

The volume of commercial investment in the first three months of the year amounted to €6.9 billion, which corresponds to a significant increase of 16% compared to the previous year. "Certainly, the expanded Middle East conflict has moved a lot in the capitalist circles in a short time. Yields on ten-year German government bonds rose by more than 35 basis points in March, and the relevant swap rates rose accordingly, with direct consequences for financing calculations and thus price determination," explains Nico Keller, Deputy CEO of BNP Paribas Real Estate Germany. "What makes us confident is that the deals that were actually implemented in the first quarter were to a large extent initiated in a market that has already learned to deal with uncertainties. This shows that the substance of the market is sustainable. Transactions are completed where cash flows are transparent and resilient, where capex planning realistically prices ESG requirements, and where all parties involved ultimately have price expectations that fit the current financing environment. This mechanism remains intact. For the time being, the Iran war is changing the pace, not the logic."

With a transaction volume of just under €1.8 billion (+5% year-on-year) and a market share of 27%, office properties occupy the top position among commercial asset classes in the first quarter of 2026. The busier start to the year underlines that activity in the office segment has continued to gain shape and is fed by a somewhat broader deal base than in the previous year. Sales impulses come primarily from properties that are competitive on the occupier side and where the location, space concept and ESG profile ensure sustainable and successful letting. At the same time, investors continue to act very selectively and transactions are concluded promptly where quality and structuring are viable even under conservative assumptions and the negotiating parties agree on a price level that works for both sides.

Retail investments followed with €1.4 billion and a market share of 20%. Compared to the previous year, this corresponds to an increase of a good 7%. The structural trend towards food-anchored local supply is clearly continuing: discounters, specialist shops and supermarkets contributed around half of the retail investment volume in the first quarter. With a package sale of 37 grocery stores for around € 200 million, one of the largest portfolio transactions of the year can also be attributed to the segment.

A temporary decline in turnover is registered for logistics investments, which, with an investment volume of €1.2 billion (17% market share), fall short of the previous year's level by around 11%. It is striking that individual transactions (€1 billion or 88%) generated the majority of sales. With 60 deals, the number of transactions will then also be at the highest level since 2022.

With an investment volume of €1.1 billion, investment activity in the Healthcare segment accelerated significantly, with an increase of 87% compared to the previous year. The successful acquisition of 80% of Cofinimmo's shares by Aedifica made a decisive contribution to this. The fair value of German real estate was more than €900 million at the end of 2025. In addition, another large-volume healthcare transaction was registered with the acquisition of a portfolio by TPG.

The hotel investment volume increased by 35% year-on-year to around €318 million. Institutional investors in particular are much more active than before, even if large-volume portfolio transactions are still missing. The robust overnight stay figures and high occupancy rates in German cities are the foundation for the growing interest.

Portfolio transactions grew strongly at the start of 2026 and, with a volume of €1.8 billion or a share of 26%, marked the highest level since 2022. The increase is mainly due to the acquisition of Cofinimmo by Aedifica. If these mergers and acquisitions are excluded from the consideration, it becomes clear that classic portfolio transactions are currently relatively rare, which is not least due to the structure of package sales. They are usually complex and require a larger funding framework. This noticeably restricts the circle of potential buyers, especially in challenging market phases such as the current one, and transaction processes take much longer. In addition, the case-by-case assessment of properties currently dominates the market. Property quality, location, tenant profile and perspective must specifically match the investment profile, which further favours individual deals. Individual transactions will then also account for €5.1 billion (+12% year-on-year). The largest deal this year in this segment is the purchase of the tax administration site in Kaarst by the state of North Rhine-Westphalia.

At 43%, the share of foreign investors is at a higher level than in previous years (€2.9 billion; +38% compared to Q1 2025), to which the Cofinimmo acquisition also contributed. However, even without this acquisition, foreign buyers still account for more than a third of the volume. The logistics segment in particular was strongly influenced by international capital (67% market share) in the first quarter. In contrast, the office segment is at the other end of the scale. Only 12% of the registered volume is attributable to international buyers, which is one of the lowest values ever registered, but is also due to the current fragmentation of the market.

At the end of the first quarter, the transaction volume in the seven largest German cities of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart was around €2.4 billion, 4% below the previous year's figure. While the number of registered transactions in the Class A cities has increased significantly (+31%), there are hardly any transactions in the three-digit million range.

Munich is currently at the top of the list of A-locations with around €740 million (+46%). With the sale of the Alte Akademie from the Signa insolvency, the largest transaction of the year so far of all A locations is in the Bavarian capital. Berlin follows at a clear distance in second place. At around €420 million, the previous year's result was down by around 57%, which is mainly due to the fact that no major individual transactions have yet been recorded. With around €354 million, Frankfurt ranks among the top locations. Partly due to the sale of the two office properties Fifty Avon and Overture, the investment volume in the Main metropolis has more than doubled. Cologne (€256 million; +195%) and Stuttgart (€177 million; +148%) also recorded significant growth, while Hamburg (€306 million; -33%) and Düsseldorf (€167 million; -33%) each recorded a decline of around a third.

Net prime yields were broadly stable across the board at the start of the year. However, there were slight upward adjustments in some cases. These are not to be understood as a short-term reaction to recent capital market movements, but rather as a continued fine-tuning of price discovery, which is derived from financing costs, risk premiums and current market liquidity in the respective sub-segments.

The net prime yield for offices in Berlin and Stuttgart rose by 10 basis points to 4.35% and 4.50% respectively. In the other A locations, the values from the beginning of the year are unchanged. The most expensive office investment market continues to be Munich with 4.20%, followed by Hamburg with 4.25%. While 4.40% is to be set in Cologne, the prime yield in Frankfurt and Düsseldorf is 4.50%.

A location-differentiated picture can also be seen in high-street real estate. While the prime yield in cities with a dedicated and, above all, clearly definable luxury location has moved sideways, an increase of 10 basis points to 3.95% and 4.00% respectively is registered for Berlin and Cologne, and by 5 basis points to 4.00% for Stuttgart. The average of A-locations in the retail high-street segment is currently 3.85%. While the peak for food-anchored retail parks and supermarkets/discounters remains unchanged at 4.65% and 4.90%, respectively, the figure is 5.95% (+15 basis points) in the much more cyclical DIY segment. Shopping centers (5.90%) are also yielding 10 basis points higher than at the beginning of the year.

In the logistics segment, the prime yield remains unchanged at 4.50% on average for A-cities, while in the residential segment for new-build properties, it is stable at 3.58% on average for the top cities.

The framework conditions for investment decisions have shifted again in recent weeks. The situation in the Middle East is weighing on economies worldwide and has once again significantly increased volatility on the capital markets. The impact that the armed conflicts will have on the global oil supply and thus on economic growth and productivity as well as downstream on energy prices, inflation expectations and interest rates cannot yet be clearly assessed. However, the IEA (International Energy Agency) assumes that the current supply disruptions in the oil market could reach Europe more noticeably in the course of April, which should increase the risk of a new wave of costs for companies and consumers. Under this premise, Germany's leading institutions have recently revised their growth forecasts noticeably downwards and at the same time published higher inflation assumptions.

The economic tailwind anticipated at the beginning of the year is therefore likely to be much lower than hoped, and the recent rise in energy prices and the associated inflation risks have dampened expectations of a long-term monetary policy easing for the time being. Accordingly, financing conditions at the long end of the yield curve have moved more noticeably again, which could be reflected in renewed price discovery in individual sub-markets in an environment in which calculation and structuring are already disciplined.

"Despite the currently burdened outlook, we expect transaction activity to pick up compared to the previous year. The German user markets have proven their resilience in recent years, and there are currently no signs of further far-reaching structural changes in demand behaviour. In addition, the Federal Government's special infrastructure fund was intended to provide support for the German economy. Both are components that speak in favor of investments in the German real estate market. At the same time, we are observing that the pipeline of ongoing processes is well filled and that the range of marketable products is gradually expanding. A realistic scenario is certainly that acquisition processes will require longer lead times in the coming months and that yield adjustments may occur in some cases in the course of changed financing conditions. But as soon as there is more predictability on the investor side again, the market recovery should continue, albeit at a slower pace for the time being," says Marcus Zorn, summarizing the outlook.