Stable German investment market starts 2026 with growing momentum

The German investment market was stable overall in 2025 in a still challenging environment. For the year as a whole, investment turnover of just under €34 billion is registered. This is slightly below the previous year's result by 3.5%, but the sales development in the asset classes is very different, including the remarkable increase in turnover in the office segment of 19.5% and in hotels of almost 29%. The moderate decline in take-up amounted to 3.3% overall for commercial real estate and 4.1% for the residential portfolio segment (30 residential units or more). At the end of the year, however, the market gained momentum once again: at €10.2 billion, it was the strongest quarter in transactions in the past year. This is shown by the latest analysis by BNP Paribas Real Estate.

The most important results at a glance:

• At just under €34.0 billion, investment turnover was slightly below the previous year's level (-3.5%)
• Of this, a good €8.9 billion (-4%) is attributable to the Residential market segment
• Commercial investments account for just under €25.1 billion (-3%)
• 77.5% (€20.1 billion) of commercial turnover is attributable to individual deals
• Portfolio sales totalled €5.0 billion
• In the commercial market segment, RetailInvestments leads the way with just under €6.5 billion, ahead of office and logistics investments with around €6.2 billion each
• Berlin is once again the number 1 German A-location (a good €3.2 billion)
• While the net prime yields in the office and residential segments are stable, there are slight upward corrections in the logistics and retail sectors
• The market share of foreign investors remains at a relatively high level of just over 44%
• Around 1,400 transactions recorded

"With an investment volume of € 8.9 billion, residential property was once again by far the asset class with the highest turnover in the German real estate market. Although the previous year's result was slightly missed by just under 4%, the more dynamic fourth quarter in particular, with sales of €2.7 billion, is evidence of the unabated high level of investor interest in residential portfolios, which has not always met with a suitable product in 2025," explains Marcus Zorn, CEO of BNP Paribas Real Estate Germany. "At the end of the year, however, some large-volume transactions were successfully brought over the finish line, and there are signs of a continuation of this market revival with a higher residential investment volume for 2026. The drivers of this development will be the filling product pipeline and the continued high attractiveness of residential investments. Due to the low construction activity, the existing excess demand is likely to consolidate, so that investors can continue to count on stable rental income and potential for value appreciation – even away from the major metropolises and new construction developments. We are already registering significantly more momentum in large-volume portfolio portfolios and also outside the A-cities, which could be reflected in slightly declining yields in 2026."

"With an investment volume of €25.1 billion, the commercial investment market confirmed the previous year's result. In a challenging market environment, in which geopolitical uncertainties and far-reaching trade policy conflicts in particular had an additional negative impact on the currently structurally weak German economy, the year-on-year difference was small at minus 3%. After a strong start to the year, with the Berlin Upper West as the largest single transaction of the year and with a high level of investor activity in the initiation of deals, the market momentum lost pace in the slipstream of the additional tariffs imposed and the initial difficulties of the new federal government, which weighed on sentiment, in the summer months, only to accelerate moderately again towards the end of the year. Overall, robust user markets, a stabilizing interest rate environment and the signal from the German government on far-reaching investments and reforms have given the investment markets a somewhat more boost. The fourth quarter was also the strongest of the year with sales of €7.6 billion," explains Zorn.

"The strong final quarter shows that in many cases the pipeline has become ready for implementation and that processes are more often brought to a consistent conclusion. The decisive factors for this were more realistic price expectations and better planning of financing. Even though the total cost of debt financing did not decline as significantly over the course of the year as had been hoped at the beginning of the year, and as a result the transaction volume was also slightly below expectations, the market mechanics have stabilized. Transactions are currently in the offing, especially where quality, cash flow transparency and realistic structuring come together. Overall, 2026 is likely to be more strongly characterised by a broader deal base, even if market participants are disciplined in their calculations and risks," adds Nico Keller, Deputy CEO of BNP Paribas Real Estate Germany.

With a transaction volume of just under €6.51 billion, retail properties will be at the top of the asset class distribution in 2025 for the first time since 2011, thus accounting for around 26% of total commercial take-up. Compared to the previous year, they recorded a slight increase of around 3%. The result was also boosted by individual large-volume deals. These include, in particular, the takeover of the Porta Group by XXXLutz in the high three-digit million range, which represents by far the largest deal of the year and has given the retail volume an additional boost accordingly. However, the decisive factor for the top position is also that a comparatively large number of marketable core and core-plus products were offered and implemented in this segment overall. In a still selective environment, many investors are increasingly looking for stable income and easily calculable rental structures. Food-anchored retail and local supply formats in particular benefit from this, as they offer secure yields even in a subdued consumer climate. Accordingly, investments in discounters, specialist shops and supermarkets will contribute almost 50% of the total retail investment volume in 2025.

While office properties were still leading the ranking in the middle of the year, they are currently in second place with an investment volume of just under €6.23 billion (25% pro rata). Nevertheless, they have achieved a remarkable year-on-year increase of 20%. Significant sales impetus comes primarily from properties that are competitive on the user side and where the location, space concept and ESG profile ensure resilient lettability. In the past year, several large-volume transactions, seven of which were in the three-digit million range, were completed. The most prominent example is probably the Upper West, which was sold for more than €400 million. "Currently, several transactions with a signalling character are still being negotiated, which are likely to be included in the transaction volume in the foreseeable future. This also underlines the renewed confidence in long-term stable demand for office space. However, financing remains a key lever for the successful implementation of such transactions. Banks continue to act selectively and require a high level of transparency in cash flows, capex planning and property risks. In this environment, alternative sources of capital are therefore also becoming increasingly important," explains Nico Keller.

Just behind the office segment in third place is the logistics asset class with €6.18 billion, which thus contributes around a quarter of the overall result. Compared to the previous year, this corresponds to a decrease of around 10%. It is striking, however, that more than €4.1 billion of the result is attributable to individual transactions alone. This sub-segment is thus back in the order of magnitude of its long-term average. The portfolio share is correspondingly comparatively low at 33%. In the second half of the year, however, the portfolio business also regained momentum. In the final quarter alone, three parcel sales in the three-digit million range were registered.

Hotel transactions are in fourth place. With a registered volume of just under €1.82 billion (7% pro rata), they were able to exceed their previous year's result by around 29%. Although investors continue to check the operator quality very closely, the growing number of overnight stays and the overall good occupancy rates also support the segment across the board. Healthcare investments also recorded a significant increase in volume. At just under €1.38 billion, they account for 5.5% of the commercial investment volume.

In 2025, the commercial investment market was clearly driven by individual transactions, which account for around 80% of the total volume. At just under €20.1 billion, the previous year's result was slightly exceeded (+1.5%). This was mainly due to the fact that the number of transactions in the mid-size segment between €25 million and €100 million increased by almost a third. This is clear evidence that market activity is growing again across the board, but that this is not necessarily reflected in the volume, as the frequency of large transactions is currently still moderate. This is also confirmed by a look at the portfolio volume, which is at its lowest level since 2011 at around €5 billion. Within the portfolio segment, the volume is mainly concentrated in the logistics and retail divisions, which each record parcel sales of around €2 billion. Although the office investment market is showing much more movement overall, no portfolio transactions were recorded in the past year.

The proportion of foreign investors in 2025 will be slightly above average at 44%, which underlines the continued high international relevance of the German investment market. It is striking that European investors (€6.3 billion; +15%) and North American investors (€3.4 billion; +7.5%) recorded significant year-on-year growth, while Asian investors only placed around €450 million (-76%).

The transaction volume in the seven largest German cities of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart totalled a good €11.4 billion at the end of 2025. Compared to the previous year, this corresponds to a decline of almost 12%, which, however, is mainly attributable to the retail asset class. In the previous year 2024, for example, the two transactions of KaDeWe in Berlin and Pasing Arcaden in Munich alone generated a volume of around €1.7 billion. Such exceptional transactions were largely absent in 2025. In contrast, all other major asset classes recorded growth, in some cases significantly, in the Class A cities. As usual, office transactions make the largest contribution, accounting for €4.7 billion in the top cities, a 19% higher value than in the previous year.

Berlin is once again clearly at the top of the list of A-locations, with around €3.3 billion across all asset classes (-8.5%). The largest transaction of the year in the capital was the sale of the Upper West. Munich is in second place with €2.6 billion (-4.6%). Among the largest transactions in the Bavarian metropolis are the sales of Oberpollinger and Corbinian, both in the fourth quarter. Hamburg ranks 3rd with almost €1.9 billion (-17.4%). In addition to the purchase of a nursing home portfolio by the City of Hamburg, several office transactions were also recorded in the Hanseatic city, the largest of which is the sale of the Atlantic Haus. Cologne follows almost equally in second place with €1.2 billion (-1%) and Düsseldorf with €1.1 billion (+9.4%). With only €770 million (-53%), Frankfurt is in the unfamiliar penultimate place. This is largely due to the complete lack of deals in the three-digit million range. Meanwhile, Stuttgart brings up the rear with €630 million, which corresponds to growth of around 14% compared to the previous year

The easing of financing costs expected at the beginning of the year has only partially materialised over the course of the year. In particular, long-term capital market interest rates remained higher and more volatile than hoped. Although there is an overall increase in investor demand in most asset classes, the higher than initially expected total costs of debt financing have also led to a slight increase in yields in some cases. This materialized above all in the logistics and retail sectors. Prime yields in the logistics segment rose by a further 10 basis points to 4.50% in the final quarter. In the case of high-street real estate, a location-differentiated picture emerges. While no changes were recorded in Munich, the adjustments in the other A cities are between 5 and 15 basis points, so that the average of the top cities is up 5 basis points to 3.81%. In addition, a slight increase can also be reported for shopping centers (+20 basis points) and DIY stores (+10 basis points). Accordingly, both types of properties now yield a peak of 5.80% each. For retail parks and supermarkets/discounters, on the other hand, 4.65% and 4.90% respectively can be applied unchanged. All other asset classes are stable. As a result, the net prime yields for offices on average in A-locations remain at 4.36%. The most expensive location remains Munich with 4.20%, followed by Berlin and Hamburg with 4.25% each. In the residential segment, the prime yields of new-build properties are 3.58% on average in the top cities. The healthcare segment is stable at 4.90%.