Munich: Momentum in the office letting market picks up speed, real estate investment market on the way back to normality

"In general, however, it can be said that with correspondingly good location and property quality, areas on the outskirts of the city and in the surrounding area can also meet with the acceptance of users," says Georg Illichmann. Nevertheless, 52 percent of the deals took place within the Mittlerer Ring and only twelve percent in the surrounding area – outside the Munich city area.

Both the supply of sublet space and the completion pipeline for the next twelve months fell slightly year-on-year, causing a slight decline in the overall supply in the Munich market.

"The exogenous shocks that have influenced the market for a long time are increasingly receding into the background, so that the market is slowly returning to normality and the focus of investors is once again concentrating more on property quality and the respective opportunity-risk potentials," says Peter Tomas, Head of Investment Munich at CBRE.

In view of high interest rates for debt capital combined with persistently restrictive capital allocation on the part of credit institutions, it is currently mainly smaller properties that are traded on the market at smaller lot sizes. However, there were also isolated larger transactions, such as the sale of the office property Prinzregentenplatz 7-9 in the past quarter.

In an asset class comparison, office, residential, industrial and logistics properties in particular recorded significantly more transaction volume than in the same period of the previous year. Office was by far the most traded type of use. This confirmed the investor's focus on sustainable, high-quality office products, especially in attractive, well-connected inner-city locations with a high ESG standard.

On the buyer side, private investors and family offices with strong equity continued to dominate. The majority of institutional investors are currently still acting cautiously due to the high financing costs and inflation-related risks. At the same time, the market remained predominantly dominated by German investors, although there was a slight increase in the activity of foreign investors, especially in the second quarter, for whom the Munich market continues to offer extremely attractive investment options, even by international standards.

"There was no change in the prime office yield for the time being, so that it maintained its previous quarter's level of 4.40 percent at the end of the second quarter," says Beatrix Pillmayer, Senior Director Valuation Advisory Services at CBRE. The spread to the benchmark yield of the ten-year German government bond is currently 1.49 percentage points.

"The current developments and ongoing applications confirm the forecast of being able to achieve annual take-up of around 600,000 square metres in the Munich office letting market. It must be mentioned that take-up in the second quarter of 2026 was also significantly driven by two large-volume owner-occupier transactions," says Illichmann.

On the investment market, the lower transaction volume in the past quarter compared to the first quarter is also due to the fact that some deals have been postponed to the third quarter. "The deal pipeline is well filled, there are several exclusives that are about to be notarized," comments Peter Tomas. "In addition, there are currently many ongoing processes that give cause for optimism with regard to further market developments and suggest that investment volumes will increase in the coming months." In general, the Munich investment market remains high on investors' radar on a broad, international level. The market continues to impress with stable and sustainable rental growth, especially for top-level properties and prime assets in inner-city locations.