Colliers: Challenging environment and selectivity slow down the residential investment market at the beginning of the year

The segment of individual transactions developed much more positively: At EUR 1.6 billion, the transaction volume here was 20 percent higher than the previous year's figure. The average purchase price per transaction (excluding portfolios) rose to EUR 18 million, 9 percent above the average for 2025 as a whole.

In addition, the number of transactions increased overall: 97 purchase cases were registered in the first three months of the year, compared to 72 in the same period last year. This means that the first quarter of 2026 offers the second-best quarterly result since the beginning of 2025 in terms of transaction intensity. Overall, the market is very active, but still without large-volume deals.

Investment activity in the first quarter was much more concentrated in the top 7 locations than in the past. In total, these markets accounted for around EUR 1.2 billion, or 60 percent of the transaction volume – an increase of 83 percent compared to the same period last year. Outside the top 7 cities, the transaction volume amounted to 834 million euros, around 1 billion euros lower than in the same period last year.

Berlin (around 622 million euros) was particularly in demand, followed by Hamburg (343 million euros) and Düsseldorf (166 million euros). The largest single deal was the sale of the "Neulichterfelde" district development by the Groth Group for around 300 million euros in Berlin. In addition, three further transactions with a volume of over EUR 150 million each were registered in Hamburg, Berlin and Düsseldorf.

At the beginning of the year, the residential investment market was once again based on core portfolio properties of a young age. On the positive side, for the first time in a long time, there was noticeably higher activity in forward deals and projects. These product types accounted for around 44 percent of the transaction volume, after around 30 percent in 2025 as a whole. The more predictable financing environment at the beginning of the year and the smaller price differential between buyers and sellers have noticeably stimulated activity in forward deals and projects.

On the buyer side, asset managers in particular were the most active in terms of transaction volume with 28 percent (previous year: 25 percent) and housing companies and housing companies with 28 percent (previous year: 14 percent), while project developers and property developers dominated the seller side with 44 percent (previous year: 25 percent).

After sales in the size segment of 15 to 50 million euros led the residential investment market in 2025 as a whole, sales over 100 million euros had the highest share at the beginning of 2026 despite the lack of portfolio deals. The share in this segment was 38 percent or 790 million euros (previous year: 33 percent). Transactions of 15 to 50 million euros represent the second largest group with 616 million euros (30 percent) (previous year: 37 percent).

Last year's strong rental growth continued at the beginning of 2026, with the dynamics between the markets differentiated. Compared to the same period last year, asking rents rose by about 3 percent on average, as did prime rents in the existing segment in the top 7 cities. At the beginning of 2026, the average rents for new lettings for existing apartments in the Class A cities were 16.85 euros/m², while prime rents were 24.40 euros/m². Some cities showed a particularly dynamic rent development. Hamburg, Cologne and Düsseldorf recorded increases in the range of 6 to 7 percent, while Berlin registered a decline of 3 percent.

Francesca Boucard, Head of Market Intelligence & Foresight at Colliers: "Returns on residential investments remain stable at the beginning of 2026. For young existing properties, prime yields in Germany's top 7 cities remain at 3.85 percent, and at other locations at 4.50 percent. For 2026, we still expect yields to remain the same, as housing has the highest resilience to crises and fundamental demand is very high. However, the developments surrounding the geopolitical conflicts are currently being closely monitored, as they influence further market movements. However, due to the gloomy and tense macro environment, slightly rising yield movements are also possible in the residential segment over the course of the year."

The continued fundamentally positive sentiment on the investor side should support market activity and have a positive effect. Forward deals have recently come back into focus and result in concrete transactions. Sustained rent growth and the renewed increase in demand for young core portfolio properties continue to have a positive impact on the residential investment market overall.

Tack: "Despite an unexpectedly weaker start to the year, demand for residential investments will remain high in 2026. Investors see opportunities for a slight recovery this year and are positioning themselves despite a gloomy macro environment. However, they will continue to act selectively and have clear requirements for property quality, location and cash flow. The supply side is likely to remain well positioned, while sufficient investment products are available. Due to the renewed rise in financing costs, large portfolio holders in particular will put portfolios up for grabs in order to reduce funding risks and reduce leverage ratios. We expect an improvement in the offer. Competition for products will increase and we continue to expect a transaction volume of EUR 9 billion to EUR 10 billion in 2026 in the range of the past two years. However, if the geopolitical situation continues to escalate or tensions persist for a longer period of time, delays in transactions and price adjustments could dampen the market and delay the start of a new cycle accordingly.