Trough reached: Office investment markets at a turning point

BNP Paribas Real Estate publishes market figures for Q4 2024

In 2024, a good €5.2 billion was invested in office properties nationwide. Compared to the already weak result of the previous year, this corresponds to a further decline of almost 13%. The extremely low share of the total commercial transaction volume of only 20% also represents the lowest value ever registered. This is the result of the analysis by BNP Paribas Real Estate.

In principle, it has been confirmed that office properties were by far the most affected by the difficult economic environment and higher interest rates. In addition, there was a certain uncertainty regarding the future development of the home office quota. Here, however, the latest figures clearly show that the trend is going back to the office. This will also stimulate investment turnover.

In the current environment, major deals have so far only been made in exceptional cases. One indication is that only seven deals in the three-digit million range were recorded in 2024. It is also noteworthy that foreign investors, who are traditionally an important investor group, especially in the case of large properties, have so far only accounted for 16% of turnover. This is also a comparatively low value.

Prime yields stabilised in the final quarter, so that they are at the same level as before in all important locations. This means that the net prime yield for offices in Class A cities is 4.36% on average. Munich remains the most expensive location with 4.20%, followed by Berlin and Hamburg with 4.25%.

Turnover in A locations almost at previous year’s level

At a good €3.96 billion, sales in the A locations are also lower than in 2023, but the decline of only minus 5% is at a significantly lower level than nationwide. The most investments were made in Frankfurt, where the billion euro mark was narrowly cracked. This is closely followed by Berlin with €816 million and Hamburg with €763 million. Munich with €495 million and Cologne with €438 million are close together, ahead of Stuttgart (€250 million) and Düsseldorf with €192 million.

The very moderate transaction volume is mainly due to the lower proportion of large sales cases of €50 million or more. Compared to the previous year, this has fallen by another 24% nationwide to just over €2.3 billion. The segment up to € 50 million, on the other hand, was able to maintain the absolute level of sales and comes to € 2.9 billion. So there is definitely demand from investors across the board. Only the large properties that are heavily dependent on financing are often still avoided.

For 2025, it is becoming apparent that the office markets, just like other asset classes, will again benefit more strongly from the emerging recovery. Despite the correlation between macroeconomic development and occupier demand, the prospects of the office investment markets will increasingly improve due to falling interest rates and a trend towards rising purchase prices. As a result, many investors are thinking intensively about the timing for the right market entry and are once again focusing more on their existing investment products than in the past two years.

A significant recovery across the board is likely to begin in the area of office investments, especially when the economy picks up speed noticeably. Nevertheless, some major landmark deals are currently in preparation, the implementation of which should send positive signals for the markets.

It is also positive that most of the fundamentals of the German office markets remain extremely stable, so that healthy market structures continue to be recorded. In an international comparison, this is an advantage of the large German locations, especially in perspective. The factors in favor of the markets include the low vacancy rates, especially by international standards, as well as the very low supply of space, especially in the premium segment, and the continuing rise in rents.

“Against the backdrop of the presumably further decline in key interest rates and the signal effect of some benchmark deals, a moderate increase in transaction volume can therefore be expected for 2025. At the same time, prime yields are likely to fall again somewhat in the course of the year,” predicts Franc Gockeln.