Chapter 3Investment market

A particularly pleasing aspect of developments in 2025 is the continuous increase in transaction volume from quarter to quarter by an average of 12%.

Even though there were no signs of a year-end surge in 2025, commercial real estate achieved its strongest quarterly result between October and December, with around €7.3bn, even though some expected major deals did not go through.

Thus, the postponement of flagship transactions, such as the Frankfurt Opera Tower until after 2026, and a well-filled pipeline increase the prospects for a continuation of the early-cycle recovery trend this year. On the other hand, however, this also shows that large-volume transactions continue to be considered protracted and with an open outcome.

The framework conditions on the investment market continued to stabilise in 2025, also with the prospect of a slow economic recovery process in 2026. ECB’s monetary policy communication is more transparent, and the markets do not expect any short-term interest rate shocks. This makes planning easier for investors and project developers.

Single-asset transactions with ticket sizes in the triple-digit m € range continued to remain below average, particularly in the seven investment hubs. Around €1.4bn was attributable to sales from the insolvency estate of the Signa Group in prime inner-city locations, which, following lengthy negotiations and in some cases significant discounts, were sold exclusively to private investors. These included the department stores at Neuhauser Straße 18 (Oberpollinger, Munich), Kurfürstendamm 229–231 (Berlin) and Jungfernstieg 16 (Hamburg), as well as the development project Corbinian in Munich, a mixed-use office and retail scheme on the site of a former department store. The sale of Oberpollinger for approximately €380m was also the largest transaction in the closing quarter nationwide.

Despite another significant decline compared to long-term averages, Berlin took the lead among the top 7 cities with €2.85bn, ahead of Munich by €90m, while Frankfurt recorded a transaction volume of half a billion €, which was even lower than in the crisis year of 2009. Only the smaller Stuttgart market lagged the banking metropolis with a value of €362m. Markets outside the top 7 accounted for around 60% of last year’s transaction volume.

Core office investments by institutional investors in the top 7, such as the Cologne office complex Gerling Gardens, which was sold to Deka shortly before the end of the year, remain the exception.

At the same time, there has been an increase in interest in value-add products. If price negotiations are based on realistic market assessments and the continuing high construction and financing costs allow for an attractive business approach, foreign investors are also increasingly seizing the opportunities offered by the current market phase. The market share of international investors was 44% in 2025, up 4 percentage points on the previous year. In addition to good locations in A cities, B and C cities in prime locations also offer good entry opportunities. The ongoing convergence in pricing, which will lead to further increases in yields in 2026, especially outside of central prime locations, is likely to provide further market stimulation.

In the current phase of the new real estate cycle, which is characterized by major structural changes, the cards are being reshuffled. This is evidenced both by the shift in transaction volume between the individual types of use and by the capital groups currently active on the market.

The neck-and-neck race between the three most established types of use, industry and logistics, office (each with a 24% market share) and retail (23%), continued in 2025. Behind them are development sites with 12%, of which just under half are earmarked for the construction of data centres. In addition to the revival of the hotel (7%) and healthcare real estate markets (7%), the sales of the designer outlet centres in Wustermark and Neumünster and a package of three thermal spas, which is still subject to antitrust approval, are examples of the increasing attractiveness of asset management-intensive types of businesses and operator-owned real estate. These mostly perform independently of the traditional real estate and economic cycle and generate cash flows that can be planned for the long term. They serve to diversify and stabilise portfolios and will also be able to increase their market share in the new year, benefiting from the focus on impact investing and infrastructure real estate, without, however, being able to compensate for the declines in traditional types of use.

Over the past 12 months, private investors and family offices (18%) as well as corporations and owner-occupiers (15%) were the most active buyer groups after asset managers (23% market share). Compared to the previous year, the dominance of private investors increased by another 3 percentage points, while owner-occupiers replaced project developers in third place with an increase of 5 percentage points. As in the previous year, the top sellers were asset managers (19%), project developers (18%), and corporates and owner-occupiers (15%), most of whom were under pressure to sell.

Discussions currently give the impression that more market participants will take advantage of the opportunities in the new real estate cycle in 2026. The product range is available, and the deal pipeline is much larger than it was 12 months ago. This could also lead to a higher transaction volume.

However, the marketability of large tickets remains limited. If the moderate growth rates recorded in 2025 continue, which were also seen in the period from 2013 onwards following the slump caused by the euro debt crisis, commercial real estate trading could well reach a volume of up to €30bn by the end of the year.

Both the stimulus provided by announced government investment packages and structural reforms will only have an impact on the real estate market in the medium term. Geopolitical developments are a significant source of uncertainty for the global economy and can have both positive and negative effects. A possible resolution of the Ukraine conflict would reduce risks, while the current tensions in Venezuela and other countries are likely to place additional strain on markets and trade flows.

Increased transaction activity is expected in the specialist real estate sector. These properties offer investors long-term, stable cash flows thanks to long lease terms and attractive returns. Industrial outdoor spaces (IOS), temperature-controlled logistics properties, and cross-dock properties will be in greater demand in response to current market trends. Investments in infrastructure projects and defence companies will increase demand for IOS space. The upturn in demand from e-commerce companies will lead to an increase in parcel volumes, which will further increase the focus on cross-dock properties among users. The focus here is primarily on companies in the construction, defence, Asian e-commerce, and pharmaceutical industries. An increase in transaction volume is expected for 2026.

Even though the gradual market recovery is increasingly being driven by large-ticket single-asset transactions, retail investment activity continues to be dominated by the retail warehousing segment. As in the previous year, this segment accounted for almost two thirds of all transactions in 2025 and 48% of retail transaction volume. Excluding the aforementioned Porta acquisition, food-anchored retail parks and retail warehouse schemes represented 59% of retail warehousing transaction volume. In terms of the number of deals, their share stood at around three quarters.

High-street commercial properties, including department stores and traditional retail anchors, ranked second with a 30% share of volume and 25% of transactions. Shopping centres accounted for 22% of volume and 10% of transactions, respectively.

Despite the transactions mentioned above, the number of transactions involving commercial properties in prime city centre locations and shopping centres in high-frequency locations remains low. In the prime locations of the seven major investment centres, Colliers expects gross initial yields to range between 4.25% in Munich and 5.00% in Berlin, Dusseldorf, and Cologne.

Business plans are easy to fulfil, especially with food retailers. Existing leases are highly likely to be renewed. Rents are stable, and in prime locations, cut-throat competition between retailers is leading to rent increases. Vacancies are therefore re-let immediately, and financing conditions for local suppliers are less restrictive than for all other retail properties. ESG strategies such as the use of green electricity or the installation of a PV system or charging station can be implemented quickly, which is also in the interests of retailers and users.

Yields on shopping centres, on the other hand, are subject to further pressure to adjust to guarantee an adequate return on investment given the necessary revitalisation requirements and limited financing conditions. Over the past three months, gross yields for shopping centres in prime locations in the top 7 cities have risen slightly by around 20 basis points to 6.90%, while yields in b locations stand at 8.00%.

This year is expected to offer numerous opportunities for active investors, as an increasing number of assets will come to market as part of portfolio clean-ups. These will again include larger packages in the food-anchored convenience retail segment, but also hybrid malls and shopping centres requiring revitalisation. As a result, the sales pipeline is well filled.

The coming months will show how many investors on the buyer side will take advantage of this favourable entry point, particularly for core-plus and value-add products, and whether the purchase price negotiations, which in some cases are still tough, will ultimately lead to transactions. Our forecast assumes a moderate continuation of the current recovery path with a transaction volume of €6 to €7bn by the end of 2026.

The year 2025 was characterized by large-volume individual deals, which dominated the market with around 82% of the total volume. Portfolios accounted for 18%, with the Keystone package of 17 ibis and Mercure hotels representing the largest transaction. In addition to trophy assets worth over €100m, the mid-range segment of €20 to €50m gained significantly in importance.

The highest transaction volumes were recorded in Munich, Berlin and Cologne. This continues the trend seen in the previous year, when the leading markets had already returned to the forefront. The most active buyer groups were asset and fund managers, followed by private investors and family offices, ahead of owner-occupiers. Domestic investors remained particularly dominant, accounting for around two thirds of total volume.

The transactions that took place in 2025 now represent an important basis for comparison for the further upturn in the transaction market, which has been lacking in recent years.

Conversions, particularly of office space into hotels, remain a key growth area, offering considerable potential for investors and operators, but continue to be the most complex challenge in terms of implementation.

However, this dip, which was particularly noticeable in the summer months, could not be offset over the year. In addition, large portfolio holders scaled back their portfolio sales efforts over the course of the year and instead refocused their strategy on acquisitions. As a result, the available supply fell too sharply to achieve the expected annual result.

At -36%, the decline in transaction volume in the portfolio segment was significantly greater than that of the overall market. Of a total of ten transactions with a volume of over €100m each, seven of the largest transactions were in the portfolio segment, while individual sales increased by a pleasing 20% yoy. A transaction volume of €5.5bn was recorded here (previous year €4.6bn).

The two largest sales of the year were already completed in the first half of the year, with ZBI/Union Investment selling its Germany-wide portfolio of 8,000 apartments from the open-ended real estate fund UniImmo Wohnen to In-West Partners/I-Wohnen Group for €750m and ZBI/Union Investment selling a portfolio in northern and western Germany with a volume of €500m (3,300 apartments) to Net Zero Properties S.A./ZAR Investment, the two largest sales of the year took place in the first half of the year. The third-largest deal was recorded in the third quarter with the sale of the Marienhöfe urban quarter (880 apartments) in Berlin as forward funding to Hines’ European Core Fund (HECF) for €425m.

Transactions were characterized by long lead times, very detailed due diligence processes, and a higher susceptibility to cancellation, resulting in a decline in transaction security over the course of 2025.

The final quarter of the year was the strongest of 2025, with €2.5bn attributable to 121 transactions (previous quarters between 82 and 93 transactions).

Structurally, the market in 2025 was driven by existing properties, as in the previous year. Special buildings of recent construction and with core characteristics once again formed the foundation of investment activity in 2025. New construction projects and project developments accounted for a total of around €3.2bn (34%) of the transaction volume. Despite the financing environment now being more predictable, investors remained cautious, which was also due to the discrepancies between sellers and buyers in terms of pricing, which are greatest in this segment. Forward deals and projects remain investable in principle but have not yet reached the level of activity that would be possible from a demand perspective due to financing, cost structures, and pricing.

On the buyer side, asset managers, asset and fund managers (25%) and private capital (17%) were the most active in terms of transaction volume, while the seller side was dominated by project developers (25%) and funds (13%) as well as residential companies and corporations (12%).

In terms of ticket sizes, sales of up to €50m dominated the residential investment market, accounting for €4.7 billion or 52% of the total market, up from 37% in the previous year. The €50 to €100m segment also increased its share, rising from 12% in the previous year to 19% in 2025. In contrast, the share of invested capital in tickets above €100m fell to 29% (previous year: 48%).

The rental dynamics of previous years continued in 2025, but with clear differences between existing and new-build properties. In the top 7 cities, rents for existing apartments rose by around 5% over the past 12 months when re-let, slightly more than in the previous year, when an increase of 4% was recorded. In the new-built segment, growth in new rental rents was significantly lower at 0.5%. Rent increases showed high volatility over the course of the year. While a downward trend was observed in the first half of 2025 due to lower supply in expensive locations, there were significant rent increases again from the middle of the year onwards, which offset the correction in the first half of the year. In view of the continuing pronounced shortage of supply and the further decline in new construction figures, a renewed rise in rents in all segments and locations is expected for 2026, in line with the growth rates of previous years of up to 5%.

Even though the annual results for the residential investment market were weaker than expected, the current very positive real estate climate underscores the special position of the residential segment compared to all other types of use. The positive real estate climate is considered a reliable indicator of overall market expectations and confirms the high attractiveness of residential real estate as an asset class.

Demand for residential investments will remain high in 2026 but will develop differently depending on the type of property. Forward deals and projects will see rising demand over the course of the year, with newer existing properties continuing to be the most sought-after core investments.

Older, non-ESG-compliant portfolios will not experience any noticeable changes in demand, while micro-living will see a significant surge in demand. Investors see opportunities for an early cyclical recovery in 2026 and are positioning themselves accordingly but will continue to act selectively and set clear requirements in terms of property quality, location, and cash flow.

Competition for products will increase and a transaction volume in the range of €9 to €10bn in 2026, like the past two years, is realistic.