Published on and written by Cyril Jarnias
Germany’s commercial real estate market is at a turning point. After several years of correction triggered by rising interest rates, remote work, and an economic slowdown, signs of stabilization are multiplying. Investment volumes are gradually recovering, yields are readjusting to more attractive levels, and international capital is returning in force. For an investor, the question is no longer whether the German market will remain a European pillar, but where and how to position themselves to benefit from the new cycle.
This analysis is based on recent studies by specialized firms (CBRE, JLL, Cushman & Wakefield, BNP Paribas Real Estate, Colliers) and indicators from institutions (Bundesbank, IMF, Ifo) to identify genuine opportunities in German commercial real estate.
A market exiting correction, with a gradual return of volumes
Real estate investment in Germany is shifting from a correction phase to a phase of more sustainable growth. Projections for 2025 place the annual investment volume between €35 and €40 billion, with more cautious scenarios still mentioning €24 billion, but a clear improvement is expected in 2026 to around €30 to €40 billion. The recovery trend is already visible: in the first three quarters of 2025, the total volume reached approximately €23.9 billion, up 2% year-on-year, of which €17.2 billion was in commercial real estate in the strict sense.
The German economy contracted by 0.3% in the second quarter of 2025.
Forecasts from major intermediaries converge: 2025 should mark the stabilization of yields and a clearer recovery in demand, with a market that could normalize around €30 to €40 billion in annual transactions from 2026 onwards.
A yield environment that has become competitive again
One of the current major strengths of German commercial real estate lies in the level of yields, which are significantly more attractive than at the trough of the zero-interest period. The ECB’s key interest rates were raised to 4.5% before a first cut of 25 basis points in June 2025, bringing down financing costs while still leaving substantial risk premiums on real estate.
Prime yield comparison by asset type
Prime yields are now in a range that provides breathing room for core and core-plus strategies:
| Segment | Indicative Prime Yield (Germany) |
|---|---|
| Core Residential (Top-7) | ~3.4% – 3.5% |
| Office Prime Top-7 | 4.5% – 5.0% depending on city |
| Logistics / Industrial | 4.4% – 4.75% |
| City Center Retail | ~5.0% (4.25% in Munich) |
| Hotels | 5.25% – 5.5% |
Looking at the major office cities in detail, the hierarchy remains marked by quality and scarcity:
| City | Prime Office Yield (approx.) |
|---|---|
| Munich | 4.4% – 4.5% |
| Berlin | ~4.6% |
| Frankfurt | ~4.95% |
| Düsseldorf | ~5.0% |
| Cologne | ~5.0% |
Analysts anticipate a continued compression of yields on the order of 30 to 40 basis points on average by 2026, driven by the return of capital, the prospect of further rate cuts, and the scarcity of truly liquid prime products. For an investor entering the core or core-plus segment today, the yield/potential for appreciation pairing is therefore attractive again, provided they target the right submarkets.
International capital, pan-European funds, and the rise of private debt
Germany remains a magnet for international capital. In 2025, foreign investors accounted for more than 44% of transactions in commercial real estate and 34% of institutional residential investments. More importantly, they positioned themselves as net buyers in the first three quarters, increasing their exposure by around €3.6 billion.
The largest flows come from North America, which is particularly keen on residential and logistics assets, while cross-border European investors account for about 7% of activity and Asian capital just over 1.5%. Domestic players nevertheless remain in the majority with 53% of volumes.
In this context, asset managers and specialized mandates have become the main buyer groups, with a clear preference for core and core-plus products, which absorb about half of institutional allocations. Value-add strategies are also gaining ground, driven by repositioning opportunities (obsolete offices, assets to be greened, retail to be restructured).
Fundraising for European commercial real estate funds reached €20 billion by the end of August 2025.
Financing: return of banks and breakthrough of private credit
Financing has eased, without returning to the excesses before the rate hike. According to CBRE’s European lender intentions survey, 80% of the institutions surveyed plan to increase their lending activity in Europe, with Germany as a priority. The need for additional financing is estimated at €70 billion at the European level, of which 69% is in Germany for refinancing operations.
Margin compression on senior debt can reach up to 50 basis points in the hotel sector.
Mortgage loan origination surged by nearly 32% in early 2025 to reach €24.4 billion, while the vdp association of Pfandbrief banks reported a 24.5% year-on-year increase in real estate loan outstanding. In the residential sector, BaFin’s decision to lower the capital buffer for mortgage loans from 2% to 1% freed up €2 to €2.5 billion in additional lending capacity.
For an opportunistic investor, this configuration creates a window to structure hybrid financing, take advantage of still generous spreads on value-add, and, on the private debt side, position for the famous “refinancing gap” expected at €8.5 billion in 2026, of which over €5 billion is in offices.
Offices: a stressed, selective market, but rich in transformation opportunities
The office segment is arguably the most complex… and the richest in opportunities for investors capable of actively managing their assets. The rise of remote work has fundamentally changed the fundamentals.
Remote work, rising vacancy, and “flight to quality”
Since 2022, approximately a quarter of German employees regularly work remotely, with a predominance of hybrid models. Nearly 69% of companies now offer some form of remote work, a figure that rises to 87% for large companies, the main consumers of office space. Result: offices are less physically occupied, with three times as many empty desks as before the pandemic.
Data compiled by Ifo and Colliers on the seven main office markets (Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, Düsseldorf) show a doubling of vacancy between 2019 and the end of 2023: from less than 3% to around 6.1%, meaning the stock of vacant space increased from 2.7 to over 5.8 million sq m. In autumn 2025, the average vacancy rate for the top five metropolitan areas is around 9.1%, with peaks of around 11.5% in Frankfurt.
In sectors with high remote work rates (IT, consulting, advertising, pharma), demand for office space is decreasing, but rents per sq m in CBDs and modern buildings continue to rise. Tenants now favor smaller, better located, and higher quality spaces, concentrating demand on performance rather than quantity.
The phenomenon of “flight to quality” is striking: new or renovated buildings capable of supporting “new work” (collaborative spaces, flexibility, creative zones) and ESG requirements are leased quickly and at high prices. Conversely, older or poorly located office stock sees its vacancy rates rise, and downward renegotiations are multiplying.
A structural decline in demand… spread over time
Joint work by Ifo and Colliers estimates that office demand in the seven major cities could decline by about 12% by 2030, i.e., nearly 11.5 million sq m out of a total stock of 96 million sq m. This decline is gradual (about -1.8% per year), linked to the pace of lease renewals (on average 7 years, only 15% of contracts renegotiated each year).
The demand shock is spread over several years, providing time to restructure assets. At the same time, new construction is slowing sharply: by the end of September 2025, only 2.77 million sq m of office space is under construction in the five major German cities, the lowest level in eight years, with more than half still available.
For an investor, the opportunity is twofold:
– purchase secondary office assets in the Big 7 at a discount, transforming them into ESG-ready, flexible products adapted to hybrid work ;
– or, when the fundamentals no longer hold (location, market depth), consider conversions (residential, hotels, managed residences, micro-apartments), as already shown by some emblematic deals (e.g., office converted into 300 micro-apartments by PGIM).
Office yields and strategy
With prime yields around 4.5% to 5% in major cities and additional premiums of 80 to 120 basis points in B cities, the German office market offers a wide yield spectrum:
| Market Type | Prime Office Yield (approx.) |
|---|---|
| Munich (top) | ~4.4% |
| Frankfurt CBD | ~4.9% |
| Well-positioned B City | 5.2% – 5.5% |
| Peripheral C City | 6.5% – 7.5% |
Major surveys (PwC, CBRE) show strong competition for prime offices in metropolitan areas, while secondary markets, riskier individually, attract yield-seeking investors. The most relevant strategies today combine:
– core / core-plus on certified offices, in CBDs or established submarkets, with strong tenants and long leases;
– value-add on buildings from the 1990–2010 generation, technically sound but non-compliant with new ESG and flexibility standards, to be reconfigured in depth.
Logistics: a structural pillar, supported by e‑commerce and nearshoring
The logistics and industrial segment is arguably the most resilient in German commercial real estate. Driven by e‑commerce, the reorganization of supply chains, and nearshoring strategies, it shows robust fundamentals.
Demand, vacancy, and rising rents
In 2024, the German logistics market recorded demand of approximately 5.3 to 5.37 million sq m, down from record years but still at a high level. In Q1 2025, take-up rebounded to 1.2 million sq m, up 16% year-on-year, and the first three quarters totaled nearly 3.94 million sq m, up 10% year-on-year.
Vacancy remains low: around 3.3% in mid‑2025 nationally, with even tension in some regions (vacancy around 3.4% in Saxony along the A4). New construction is tapering off, with the project pipeline down compared to 2022, limiting the risk of oversupply.
Between 2024 and mid‑2025, prime rents rose by 2 to 3% in Germany’s five main logistics hubs. The highest levels are observed in Munich (over €10.80–€10.90/sq m/month), while Düsseldorf, Hamburg, and Stuttgart are around €8.50/sq m/month. Year-on-year, average rents in these markets increased by approximately 5%.
User profile and geographic distribution
Demand is well diversified:
– Industry and production: 32% to 39% of take-up depending on sources, the top contributor in 2024;
– Logistics service providers: up to 40% of take-up in H1 2025;
– Distribution / retail (including e‑commerce): about 26%.
The major logistics regions (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Leipzig, Munich, Ruhr, Central Germany) capture a significant share of volumes, with a particularly marked rise of Central Germany (Leipzig/Halle, Magdeburg, A4 corridor), where take-up jumped over 50% in H1 2025.
Landmark transactions (new BMW battery factories, Mercedes-Benz platforms, logistics portfolios sold to Brookfield, Segro, GLP, CTP) illustrate the depth and internationalization of the market.
Logistics: a competitive yield and a highly sought-after product
From an investment perspective, logistics has become the leading segment of the German market in recent years. In 2023, it accounted for nearly €6.95 billion in transactions, followed by €6.02 billion in 2024 (-21% over five years, but +3% year-on-year). In H1 2025, logistics volumes reached around €2.3 to €2.4 billion, positioning the sector as the fourth-largest asset class (16% of total), behind residential, retail, and offices.
Prime yields in major logistics hubs have remained around 4.5% since late 2024, with occasional slight increases on the order of 10 basis points. The market benefits from a favorable dynamic: a general compression of real estate yields is anticipated, which would benefit the logistics segment. At the same time, demand for assets compliant with ESG criteria is growing strongly, making last-generation warehouses particularly attractive and sought-after.
For an investor, German logistics therefore offers:
– robust rental fundamentals (low vacancy, rising rents, demand driven by e‑commerce and nearshoring);
– a competitive prime yield in the current interest rate context;
– and additional potential for value creation through ESG compliance and capturing demand from major international distributors and industrials.
Retail: a sector in restructuring, but with winning formats
The German retail sector, valued at approximately €845.6 billion, remains one of the most powerful in Europe. It has experienced a period of intense pressure with the rise of e‑commerce, the closure of thousands of stores, and sector consolidation, but certain retail real estate formats are emerging as structural winners.
A connected, demanding, and price-sensitive consumer
Over 95% of Germans aged 16 to 74 use the Internet, and nearly 78% shop online at least once a year. E‑commerce has returned to growth (+3% approximately in the first two quarters of 2025), while marketplaces are gaining market share faster than the overall segment. Nevertheless, physical stores remain central: over half of consumers combine online and offline for their non-food purchases, and over a quarter prefer in-store visits to “see and touch” products.
Consumer trade-offs in favor of travel, health, and food spending, as well as the active search for promotions (by over 60% of them) and massive adoption of loyalty programs, directly influence the performance of different retail formats.
The most resilient real estate formats
Two segments stand out as particularly robust:
– retail parks focused on daily needs (groceries, drugstores, DIY, health), often in suburban areas, with tenants such as discounters, supermarkets, and specialized chains;
– prime city-center locations in major metropolitan areas, capable of hosting premium offerings, flagship stores, restaurants, and experiential concepts.
Studies forecast annual rental growth of about 1.9% on major shopping streets over the next two years, with stabilization or a decline in vacancy rates in the best locations. Investors are targeting dominant assets, as evidenced by recent transactions on shopping centers (e.g., Gropius Passagen in Berlin) or retail portfolios (e.g., over 100 Porta stores), whether in city centers or retail parks.
Prime yields for German high streets are currently around 5%, with marked differences between Munich (approximately 4.25%) and Berlin (approximately 5%). Retail parks, considered slightly riskier but very resilient when focused on daily spending, often offer slightly higher levels.
Hotels and healthcare: high-yield specialized segments
Two niche segments deserve attention for their yield/risk profile: hospitality and healthcare/seniors real estate.
Hotels: return of flows and high yields
After the health crisis, the German hotel market experienced a gradual restart. In H1 2025, transactional volume reached €906 million, up 87% year-on-year, peaking at around €1.3 billion in the first nine months. Prime yields for hotels are generally between 5.25% and 5.5%, with some core transactions reporting gross yields around 4.7% for very secure products.
The Keystone portfolio, comprising 17 ibis and Mercure chain hotels sold for over €100 million, illustrates investors’ appetite for diversified platforms managed by recognized operators. This example shows how this asset class attracts those seeking yields higher than offices or residential, while accepting higher operational risk.
Healthcare, seniors, managed residences: structural demand
Germany is facing a rapidly aging population: by 2030, about a quarter of the population will be over 65. This trend leads to sustained demand for nursing homes, senior residences, care clinics, and healthcare assets. In H1 2025, over €566 million was invested in this sector, mainly in retirement homes.
Net yields on these social assets generally range from 4.5% to 6%, with long, often triple-net leases, and a relatively defensive cash-flow profile. The acquisition of entire portfolios from bankruptcies, such as the purchase of 22 facilities from the troubled care group Argentum, also shows there is a value-add field for players capable of restructuring operations.
Institutional residential: a defensive pillar for a mixed strategy
Even though the main focus here is commercial real estate, institutional residential remains a pillar of many strategies in Germany, whether in pure housing, student housing, or coliving. Between January and September 2025, approximately €7.7 billion was invested in residential, care homes, and student housing, with an annual projection of €8 to €10 billion.
The Ifo Institute anticipates around 205,000 housing completions in 2025, a figure well below the political target of 400,000 units per year.
Prime yields for residential in the Top 7 remain low (around 3.4%–3.5%), but combining managed residences (student, coliving, seniors) with mixed-use programs (offices, ground-floor retail, healthcare) can improve the yield/risk profile of a portfolio. Major operations, such as the sale of residential portfolios for €750 million (ZBI/UniImmo), show that residential remains a massive and liquid asset class.
ESG, certifications, and taxation: value creation levers
Regulatory and ESG dimensions have become central to assessing opportunities in Germany. They are no longer just a “nice to have” but condition valuation, financing terms, tenant appetite, and the eventual exit rate.
Environmental certifications: key filter for institutional capital
The most widely used certification system in Germany is DGNB, which claims over 80% market share for new builds and over 60% for all commercial assets. In 2021, over a quarter of single-asset investment in Germany targeted certified buildings, and in offices, over one in three euros was directed to DGNB, LEED, or BREEAM assets.
The DGNB certification assesses buildings on around forty criteria, organized into six main themes: environmental, economic, socio-functional, technical, process, and site. It awards four performance levels: Bronze, Silver, Gold, and Platinum. Certification can be obtained during construction (pre-certification) or up to three years after completion. It serves as proof for accessing public support, notably the QNG label or KfW funding for climate-friendly buildings.
For the investor, a certified asset:
– appeals more to corporate tenants subject to CSRD and EPBD;
– often benefits from better financing terms (some banks tie improved margins to having a certificate);
– offers a competitive advantage upon resale, particularly to Article 8 or 9 funds.
Tax incentives and energy transition support
German public policy reinforces this dynamic. The public bank KfW has significantly expanded its support for energy-efficient renovation with €14.4 billion in grants and loans, able to finance up to €150,000 per dwelling for certified “climate-friendly” projects. Accelerated depreciation rules (5% straight-line annual + 5% declining for certain projects compliant with §7b EStG) make green construction and renovation more attractive.
This is the federal base rate for the property tax on commercial assets, effective in 2025.
To structure a strategy in Germany, it is therefore essential to master:
– holding taxation (corporate tax around 15.825%, plus local trade tax bringing the overall effective rate to 30–33% for corporations);
– the real estate transfer tax, varying from 3.5% (Bavaria) to 6.5% (Brandenburg, North Rhine‑Westphalia, etc.), with Berlin at 6% and a planned increase to 6.5%;
– the possibility of using vehicles like G‑REITs (exempt from corporate and trade tax in exchange for a minimum distribution of 90%) or classic capital companies (GmbH, AG) with a 95% exemption on capital gains from share sales subject to a minimum participation of 10%.
Key risks: refinancing, construction, taxation, and macro
The picture would not be complete without the main risks that investors must factor in:
Several structural and cyclical elements shape the market. The refinancing risk, with an estimated ‘gap’ of €8.5 billion by 2026 concentrated on offices, can generate forced sales and volatility, but also opportunities for equity and private debt. Construction costs, up 3.2% year-on-year and 64% since 2010, penalize new projects and value well-located existing assets. The budgetary (public deficit around 3.1% of GDP) and geopolitical context adds uncertainty. Residential rental regulation remains strict (rent freeze until the end of 2029), while the risk for commercial real estate comes mainly from ESG standards and taxation. Finally, sluggish economic growth and rising corporate insolvencies could increase vacancy in some vulnerable segments.
However, these risks are balanced by a set of supports: a €500 billion infrastructure and climate fund announced by the government, a gradual decline in inflation and interest rates, institutional stability and market depth, which continue to make Germany a prime location on a European scale.
How to position: strategic paths for investors
Faced with this contrasting landscape, several investment approaches emerge.
Bet on structural winners
Some segments benefit from positive long-term trends:
– logistics and modern industrial assets: benefit from e‑commerce, nearshoring, demand from 3PLs and industrials;
– food-anchored retail parks and prime high-street: capture resilient consumer flows and polarization towards the best locations;
– healthcare, seniors, managed residences: leverage demographic dynamics and long leases, while remaining selective on operators.
These segments can form the core of a core/core-plus portfolio, with net yields generally between 4.5% and 6%.
Exploit office repositioning
For offices, opportunities lie mainly on two fronts:
For offices, favor products already certified or easily certifiable for ESG, located in CBDs of major cities, with well-rated tenants, anticipating yield compression. In parallel, identify obsolete but well-located buildings (from the 90s-2000s) for value-add operations. Value creation relies on converting them into new-generation offices (flexible spaces, high environmental quality, digital) or alternative assets (residential, hospitality, coliving, healthcare), by activating ESG levers (energy renovation, certifications) and product reconfiguration.
Leverage ESG megatrends
Green assets, certified or certifiable, are at the intersection of several forces:
– increased demand from corporate tenants subject to non-financial reporting obligations;
– access to more favorable financing, via KfW programs, bank green loans, sustainable mortgage-backed securities;
– appetite from Article 8/9 funds and thematic REITs (green offices, sustainable logistics, etc.).
Billions of euros in funding and grants distributed by KfW for energy upgrades.
Benefit from the return of financing and private debt
In a phase of interest rate normalization, investors can:
– lock in financing at still attractive rates compared to historical levels (mortgage rates remain close to the long-term average, around 3–4%);
– position for private real estate debt, particularly on refinancing deals for well-located offices, logistics, or retail, with attractive spreads and better covenant protection than in the past decade.
For family offices or flexible institutional investors, combining equity and private debt on selected deals allows diversification of the return source while controlling risk.
Conclusion: a market that has become “investable” again for selective investors
Commercial real estate in Germany is no longer in the euphoria phase of the zero-interest decade, but in a healthier configuration. Prices have been readjusted, yields have become attractive again, international capital is returning, financing is reopening, and the different asset classes offer distinct opportunities:
The main strategic axes for structuring a resilient and performant real estate portfolio.
Logistics and resilient retail formats as structural pillars of the portfolio.
Offices as a preferred playing field for value-add strategies and ESG integration.
Hotels and healthcare assets represent high-yield niche segments.
Institutional residential and managed residences form a defensive core within mixed portfolios.
In this context, the competitive advantage will not come from a simple macro bet on rising prices, but from the ability to finely read local dynamics, integrate environmental and regulatory requirements, structure intelligent financing, and actively manage assets. For investors capable of combining these skills, Germany offers, at the dawn of this new cycle, an exceptionally rich investment ground in commercial real estate.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
