
City Survey
Q4 2024
Investment market
Fourth quarter brings slight recovery, 2025 remains challenging
In 2024 as a whole, real estate was traded for 36.2 billion euros. Of this, 25.5 billion euros were accounted for by commercial real estate and 10.7 billion euros by the institutional residential segment with ten residential units or more. In the commercial segment, 8.3 billion euros amounted to a third of the transaction volume in the final quarter. The quarter with the highest turnover in the last two years by far helped the full-year result for 2024 to an increase of 9 percent year on year and sets a positive sign for 2025. However, the ten-year average was missed by a good half, which illustrates the level shifts as a result of the interest rate hike cycle, which ended in June 2024.
in commercial transaction volume (+9% yoy)
Transaction Volume in Germany (in bn. €)
Transaction Volume in Germany by Property Type (in m. €)
Brightening of sentiment is gradually reflected in transaction activity
Overall, there was a small year-end spurt, which followed three stable quarterly results above the respective previous year’s level. Thus, the improvement in sentiment in the industry in view of the ECB’s interest rate cuts since the middle of the year has also materialized in rising transaction volumes.
The trough is likely to have been passed, although large-volume core investments, especially by German institutional investors, which characterized the previous boom years, have largely failed to materialize.
In the fourth quarter, the number of major transactions remained manageable, with a purchase volume of over 250 million euros each. Of the five deals, four were attributable to portfolio sales, three of which were in the logistics sector. The largest and only single deal was the sale of Therme Erding including affiliated hotels to the Austrian Therme Group in the mid three-digit million euro range, which landed in 5th place for the year as a whole.
The largest single transaction of 2024 thus remains the sale of the Berlin luxury department store KaDeWe to the Thai Central Group for around one billion euros. With the acquisitions of the mixed-use inner-city district Fünf Höfe (2nd place) and the Pasing Arcaden shopping centre (3rd place) in Munich by family offices, as well as the exhibition halls in the Rheinpark metropolis (4th place) to the City of Cologne, it was above all equity-strong, non-institutional investors who took advantage of suitable opportunities over the course of the year. Overall, private investors and family offices were the second largest buyer group with an investment volume of 3.8 billion euros or a market share of 15 percent, behind asset and fund managers with 8.2 billion euros or 32 percent. The latter were particularly behind the portfolio purchases. Project developers (11 percent) and open-ended real estate and special funds (10 percent) followed in 3rd and 4th place.
Prime Yield Office (in %)
Logistics real estate once again the type of use with the highest turnover
The impressive return of large-volume portfolio transactions in the final quarter of the year gave the logistics segment a market share of 29 percent and thus 1st place as the type of use with the highest turnover for the second time in a row. This means that the share of parcel sales rose again to 27 percent at the end of the year.
With a market share of 22 percent, offices performed only slightly better than retail properties with 20 percent. By far the largest office transaction of the year, the Rossio office ensemble in Cologne’s Messecity with the City of Cologne as user and buyer, only occupies 12th place with around 270 million euros. However, in view of the current debate about future demand developments, the type of use remains particularly affected by the reluctance of institutional investors. However, quality prevails, and fortunately four more office buildings in the order of more than 100 million euros have been traded in the past three months, three of them in TOP 7 cities.
Ultimately, all seven investment centers, especially Frankfurt and Munich, were able to make up ground after the historic slump of 2023.
Compared to the long-term average, however, the TOP 7 have fallen behind more significantly than the market as a whole.
Market polarization will continue to dominate yield development
In terms of price developments, market polarisation can be expected to continue. The peak of the wave of insolvencies in Germany has not yet been reached. After the sensational insolvency announcements by project developers in the past two years, the number of applications on the user side is now increasing, as the latest examples from the hotel, retail and automotive sectors show. In addition, adjustments of property stock by portfolio holders will continue to shape the market on the supply side – whether due to due refinancing or increasing requirements for market-compliant properties. At the same time, increasingly selective buying behaviour can be observed on the demand side.
gross initial yields office
While the prime yields for office, high-street and logistics properties are likely to have bottomed out in the prime locations of the seven German investment centres, and we can expect the first yield compressions of 10 to 20 basis points as early as the course of 2025, the spread between locations and risk classes will remain broad.
Outlook: Transaction volume of 30 billion euros realistic in 2025 despite ongoing challenges
The upturn in transaction activity will continue in the new year. Investors are more decisive again, especially in view of increased planning security with regard to the interest rate environment and financing costs.
There are increasing signs that one or the other opportunistic player who has not been seen on the market in the last ten to 15 years is also returning.
Overall, Colliers expects moderate growth in transaction volume, with a focus on the second half of the year. The transaction volume in commercial real estate could thus advance back into the region of 30 billion euros in annual turnover. At the same time, further challenges are emerging that go hand in hand with geopolitical uncertainties, the outcome of the election and the reaction of the economy, financial and capital markets to all these changes. These could put a further damper on the gradual recovery in the investment markets. Therefore, the forecast is based on a moderate growth rate, which was registered in the recovery phase of the real estate investment market after the euro debt crisis in 2012/13.
Key figures on the German investment market
German Investment Markets in Comparison | Germany | Berlin | Dusseldorf | Frankfurt | Hamburg | Cologne | Munich | Stuttgart |
---|---|---|---|---|---|---|---|---|
Commercial Transaction volume (in million €) 2024 | 25,497 | 3,238 | 910 | 1,417 | 1,626 | 1,010 | 2,704 | 452 |
Commercial Transaction volume (in million €) 2023 | 23,439* | 2,538 | 610 | 580 | 1,261 | 625 | 1,235 | 449 |
Change year-on-year in % | 9 % | 28 % | 49 % | 145 % | 29 % | 62 % | 119 % | 1 % |
Most Active Buyers | Asset Managers / Fund Managers 32 % | Asset Managers / Fund Managers 61 % | Property Developers 56 % | Asset Managers / Fund Managers 22 % | Asset Managers / Fund Managers 31 % | Public Administration 65 % | Private Investors/ Family Offices 61 % | Private Investors/ Family Offices 40 % |
Most Active Sellers | Asset Managers / Fund Managers 21 % | Listed Porperty Companies 43 % | Project Developer 35 % | Corporates/ Owner-Occupiers 29 % | Open-ended Real Estate Funds/ Special Funds 37 % | Asset Managers / Fund Managers 47 % | Open-ended Real Estate Funds/ Special Funds 36 % | Project Developer 33 % |
Most Important Property type | Industrial & Logistics 29 % | Retail 43 % | Land (commerdial) 43 % | Office 54 % | Office 44 % | Mixed Use 38 % | Mixed Use 40 % | Mixed Use 48 % |
Prime Yield Office | 4.90 % | 5.00 % | 4.95 % | 4.80 % | 5.00 % | 4.50 % | 4.80 % | |
Prime Yield Retail | 5.00 % | 5.00 % | 4.85 % | 4.50 % | 5.00 % | 4.25 % | 4.80 % | |
Prime Yield I&L | 4.75 % |
Data as of Q4 2024
Portfolio transactions ensure a surprising result in the German industrial and logistics investment market
The German industrial and logistics investment market ended 2024 with a surprisingly positive result of around 7.5 billion euros. After the transaction volume in the third quarter was still at the level of the crisis year 2023, an increase of around 11 percent was achieved at the end of the year (2023: 6.7 billion euros). Compared to the ten-year average, there is a solid increase in sales of 12 percent, although the result cannot match the record years 2021 and 2022 with over 9 billion euros each. As a result, the five-year average was missed by 5 percent. The solid result points to a slow brightening in the investment market.
The four interest rate adjustments that took place during the year, most recently in December, were the most important drivers. Despite the difficult overall market situation, liquidity remains high and, as in 2023, the logistics asset class achieved a record market share of 29 percent of the overall commercial investment market. In 2025, the focus will be on the further development of the rental market, which must be considered in a differentiated manner by region and sector.
transaction volume I&L
Transaction Volume Industrial & Logistics (in bn. €)
Forecast from 2024
Portfolio boom in the fourth quarter drives up transaction volume
The year 2024 was mainly characterized by strong investor activity in the first and fourth quarters. Portfolio transactions played an important role in this. Overall, the last months of the year were the strongest in terms of sales. Since October, around EUR 1.9 billion has been generated through portfolio transactions and around EUR 1.1 billion through single transactions. This means that the fourth quarter was responsible for almost 41 percent of the transaction volume. The strongest quarter to date was the first, with a share of around 25 percent of the total result. In total, around 3.9 billion euros were generated through portfolio transactions over the course of the year.
These deals are a clear sign that the crisis in the investment market has largely been overcome.
Activities in the portfolio area even exceeded those of the record year 2022 of 3.7 billion euros.
At that time, the main driver of market activity was the positive development in the rental market with above-average attractive rental growth potential. We are currently observing that investors are opting for the logistics asset class primarily for reasons of diversification and market liquidity. In recent years, the logistics real estate market has proven its resilience to crises, so investors are looking to increase their allocation to this asset class.
The significant portfolio transactions in the fourth quarter were the acquisition of Tritax by Brookfield for a mid-triple-digit million amount and the acquisition of some selected properties from this portfolio by Segro. In addition, a portfolio consisting of four properties was sold by VIB Vermögen to EQT Exeter for a low three-digit million amount. In addition, the new market player Greykite entered the market, acquiring a pan-European portfolio of a total of 13 properties, four of which were in Germany, for a low three-digit million amount.
In terms of investor activity in single transactions, the majority of sales were registered in the first and fourth quarters, so that they were responsible for around 29 percent of the transaction volume. Around 48 percent of the total transaction volume was generated with individual properties. Due to the price corrections that have taken place since 2023, the total volume of single transactions was at the level of 2019.
The investors’ sweet spot has leveled off between 60 and 80 million euros for core single transactions. A first upward trend is recognizable. The improvement in financing conditions and the slightly positive leverage effect are beneficial here. As a result, the share of core-plus transactions continued to increase in 2024 to a total of 46 percent.
The largest single transactions in 2024 included the purchase of a logistics hall in Bondorf by REWE Group for almost 150 million euros and the transaction of the Amazon property in the Hanover logistics region by Ampega Asset Management for Talanx for almost 120 million euros. In addition, the largest logistics property of the tenant Fiege in Dieburg was sold to Clarion Partners for just over 100 million euros in the third quarter.
Stabilization of yields continues
For the fourth quarter in a row, yields were stable. At the end of December, Colliers recorded a gross prime yield of 4.75 percent for core logistics properties with an area of more than 3,000 square meters.
gross initial yield I&L
Foreign investors in particular rate the German logistics market positively and expect a recovery in leasing activity due to the declining new construction pipeline.
Thanks to the large number of portfolio transactions, around 70 percent of the total transaction volume was accounted for by international investors. Positive impulses are expected above all from e-commerce. This is supported by declining inflation, wage increases due to new collective agreements and the growing volume of parcels. For the coming year, Colliers forecasts a slight increase in transaction volume of just under 8 billion euros.
Prime Yield Industrial & Logistics (in %)
Investment year ends with sales fireworks for retail properties in local supply portfolios
In 2024 as a whole, retail real estate was traded for 5.0 billion euros in Germany. This exceeded the previous year’s result by 3 percent. The increase in take-up was thus slightly lower than in the overall market for commercial real estate, where growth of 9 per cent was registered for the year as a whole after a significant increase in turnover in the fourth quarter.
As with the market as a whole, the year-end quarter can also be seen as evidence of the gradual revival of transaction activity from a retail point of view. After all, with 1.2 billion euros achieved in the fourth quarter, the average volume of the previous quarters was maintained, although there were no other large-volume individual transactions in the order of more than 250 million euros. Such landmark deals in 2024 included the sale of the Berlin luxury department store KaDeWe for one billion euros to the Thai Central Group in the second quarter and the sale of Munich’s Pasing Arcaden for 388 million euros to the Swedish family office of the Ingka Group in the third quarter.
retail transaction volume
Transaction Volume Retail (in bn. €)
Transaction Volume by Type of Building
Portfolio transactions that had been on the market for a longer period of time were completed
In the last weeks of the year, in contrast to the previous quarters, a large number of food-anchored retail portfolios or retail parks in the range of between 30 and 120 million euros that had been on the market for some time were brought over the finish line.
This sends a clear signal of a market revival for 2025 as well. The pricing processes, which delayed numerous trades in the first half of the year, have improved significantly in view of increased planning security with regard to the interest rate environment and financing costs. At the same time, the number of bidders at food stores is increasing again. An increasing allocation of capital by institutional investors can be observed, whose current investment strategy mainly includes smaller properties that are secured by long leases of tenants with strong credit ratings and have crisis-resilient use. In the current market environment, local supply properties are therefore extremely attractive from a risk-return point of view.
The prime gross initial yield for specialty food stores and small local supply centers has consolidated at 5.40 percent in recent months. Retail parks with food anchors are quoted at 5.70 percent. If the market continues to recover, a yield compression of 10 to 20 basis points in the course of 2025 is quite realistic. In the case of commercial buildings in prime locations, sellers and buyers also seem to be gradually converging.
gross initial yield food retail
The range of yields in the main business locations of the country’s top 7 investment centers ranges from 4.75 to 5.90 percent, depending on the retail share and stability of the main retail tenants.
Across all products, private investors and family offices formed the second largest buyer group in the past year with an investment volume of 21 percent, just behind asset and fund managers with 22 percent. For shopping centres, which often come under price pressure with a rising need for repositioning when financing expires, further increases in yields can be expected.
Specialist stores remain a rock in the surf
The transaction activity in the fourth quarter ensured that the portfolio share increased slightly to 27 percent over the course of the year. In addition, specialist stores and retail parks maintained their top position as the most sought-after type of operation in terms of the number of transactions with a market share of 63 per cent, and also regained this position in terms of sales volume at 43 per cent at the end of the year. Of these, two-thirds of all sales and more than three-quarters of the volume had a food anchor. Inner-city commercial buildings accounted for 30 percent of all deals and 40 percent of the transaction volume. Half of the latter was accounted for by the KaDeWe sale. Shopping centres amounted to 7 per cent of all sales and a volume share of 17 per cent, of which Pasing Arcaden also accounted for just under half.
Outlook: Market recovery continues at a moderate pace
Despite the improvement in sentiment on the market as a whole, market activity will only gradually pick up speed again in 2025. Due to the increase in insolvencies, which are expected to peak this year, trade is one of the main problematic industries, according to the project developers. In addition, portfolio adjustments by portfolio holders will continue to shape the market on the supply side, while selective buying behavior on the demand side will limit an increase in transaction volume. It remains to be seen how willing the market is to take risks in a phase of sustained cost pressure for consumers, retailers and real estate investors as early as this year. Major transactions such as the billion-dollar Breuninger portfolio, which is offered on the market as part of a company sale, become a tightrope meter here. Without such deals, the transaction volume will hardly be able to match the result from 2021 before the start of the interest rate hike cycle of 8 million euros.
Prime Yield High Street (in %)
Hotel investment market with revival in the second half of the year and positive outlook for 2025
In 2024, a total of around 1.4 billion euros was invested in hotel real estate in Germany. This corresponds to an increase of almost 7 percent compared to the previous year. Around 900 million euros were accounted for in the second half of the year. The share of hotel investments in the total commercial transaction volume was, as in 2023, 5 percent.
After the hotel volume has successively declined over the past two years, the trough was passed in 2024 and the second half of the year already showed a revival in investor activity.
transaction volume hotel
Hotel investments remain a niche, but the hotel investment market has finally left the marginalization during the Corona pandemic behind.
A clear trend can be identified from the last quarters of 2024 for 2025: Conversions from office to hotel use help portfolio holders not only to counter the regional office vacancy rate through targeted operator searches, but also to satisfy the increasing demand from hotel guests for budget design hotels. This development results in an increased need for collection brands.
Transaction Volume Hotel (in bn. €)
Transaction Volume by Type of Hotel (in %)
Top 7 locations in the focus of investors, Dresden most popular B-city
Around 56 percent of the total hotel investment volume, or around 780 million euros, was allocated to the top 7 last year. In 2023, it was only 35 percent. Berlin stood out among the top 7. A total of seven properties with a total volume of over 370 million euros were sold in the capital. This is also where the biggest transaction of the year took place: the sale of the Hotel de Rome. For over 140 million euros, the Italian Gruppo Statuto secured the five-star hotel, which is operated by Rocco Forte, from the sovereign wealth fund of Singapore (GIC).
The share of the top 7 in hotel volume was somewhat lower with the outbreak of the corona pandemic, but historically it has always been over 50 percent, sometimes even higher. The average asset price at these locations was over 30 million euros in 2024. Among the B cities, Dresden stands out, where a total of six hotels with a total of over 680 rooms changed hands. However, the investment volume for the six hotels was less than 100 million euros, with smaller hotel sales dominating apart from the top 7 with an average price of around eleven million euros.
Outlook: More activity in the hotel investment market and increasing competition for core properties expected in 2025
We expect the hotel investment market to continue to grow in 2025 and to achieve a higher transaction volume again. The improved framework conditions on the interest rate and financing side are supporting the real estate market in general. Good hotel performance figures and expected increases in revenue in the hotel brand segment in the coming years will further benefit the hotel investment market. In particular, properties in the core risk class will continue to be in demand. Here, a limited supply meets an increasingly ready demand.
More investor competition is expected for individual top products, which may lead to a slight compression of returns in the corresponding segment from the second half of the year. Pricing in the value-add or opportunistic segment, on the other hand, remains more difficult.
Here, investors weigh up not only hotel use but also conversion potential, for example into residential uses. A transaction volume of around 1.8 billion euros in 2025 as a whole seems possible.
Prime Yield Hotel Real Estate (in %)
Residential investment market recovers significantly in 2024, upturn expected to continue in 2025
The German residential investment market closed 2024 with a significant increase compared to the previous year. For the year as a whole, a transaction volume of around 10.7 billion euros was recorded, which corresponds to an increase of 18 percent compared to the previous year. After an already strong third quarter, the transaction volume rose noticeably again in the last three months of 2024 and, at 3.8 billion euros, reached a new high since the interest rate turnaround in 2022. Numerous large-volume transactions in the segment over EUR 100 million made a decisive contribution to the full-year result and accounted for 54 percent of annual revenues. At EUR 5.7 billion, around 54 per cent of investment turnover was attributable to portfolio transactions, which, as in the previous year (61 per cent), supported the market momentum in the residential investment market.
The market was dominated by sales by large portfolio holders and funds such as VONOVIA SE, Union Investment / ZBI and Peach Property Group, which sold several large portfolios of more than EUR 400 million each with a total of around EUR 2.8 billion. At around 5.2 billion euros, around half of investment activity in 2024 was concentrated in the top 7 cities with a strong focus on Berlin (3.3 billion euros) and Munich (1.0 billion euros).
Demand for residential real estate increased steadily in all segments over the course of the year. This positive development has been supported by the interest rate cuts so far from the middle of the year. This led to a significant improvement in market sentiment and further growing investor confidence in the market.
transaction volume institutional residential segment
Investors see the opportunities of the corrected price level in the current market situation, both in portfolios with younger stock, but also increasingly in development properties from the value-add segment and with an opportunistic background.
Although the Forward Deals segment remains subdued, sentiment has improved here as well. Over the course of the year, yields on both existing and new-build properties, projects and forward deals have continued to stabilise, so that a yield level of 3.85 per cent is currently registered for young existing properties in A-cities and 4.50 per cent in other locations. In the area of forward deals, the yield range in the Class A cities is between 4.10 and 4.50 percent.
yield in Class A cities, 4.50% in other locations
Rental momentum will continue unabated with high intensity in 2024, rents expected to rise in 2025 as well
Despite a slight stabilization of supply in the rental segment, the pressure on rents remains high. Compared to the same time last year, asking rents at the end of 2024 rose by 6 percent in the existing segment in the Class A cities and by almost 7 percent in the new construction segment. The average rent for new rentals for existing apartments in the A-cities is now 15.80 euros/m², and in the new construction segment at 21.00 euros/m².
As in the previous year, rents are expected to rise in all segments in 2025 due to the expected decline in new residential construction and the continuing shortage of supply.
Growth rates beyond 5 percent seem realistic, not least because the rent brake may expire next year.
Outlook: Further increase in investor demand and higher transaction activity
The housing market will continue to show a divided picture between investors and users in 2025.
While the residential real estate investment market will continue to recover and a stronger revival of transaction activity by investors is to be expected, tenants are not only facing major challenges in the metropolises.
This is because a high demand for housing with far too little supply will continue in 2025. The number of building permits is at its lowest level since reunification. The lack of new buildings is exacerbating the current housing shortage and the end of the governing coalition has worsened the framework conditions for social housing. As a result, rents will continue to rise in 2025, making residential investments attractive to investors.
The full-year result will depend in particular on how the sales and portfolio adjustment processes of large portfolio holders develop over the course of the year and the intensity with which the projects and forward deals segments, whose momentum was still subdued in 2024, will pick up. In the course of a revival of these segments as well, Colliers believes that a full-year result of over 12 billion euros is possible in a further improving overall environment for residential real estate.
Upturn in office and commercial buildings outside the top 7 slightly weaker than in the overall market
Away from the top 7, around 2.3 billion euros were invested in office and commercial buildings in 2024 . This was almost 12 percent less than in 2023.Contrary to the trend in the top 7 and the commercial real estate market as a whole, the transaction volume in this market segment declined moderately.
Especially in the first half of the year, the segment was still subdued and both investors and sellers were cautious. The interest rate turnaround carried out by the ECB in the middle of the year contributed to the improvement from the middle of the year. However, there was a lack of large-volume core transactions, for which there is currently little capital apart from the top 7.
outside the top 7
Many investors prefer the top 7 in the classic office sector, as pricing is largely completed there, at least in the core segment. In the B&C cities, properties with special uses, infrastructure character or public tenants achieved the highest factors.
Transaction volume develops very heterogeneously regionally
The highest transaction volume was achieved in North Rhine-Westphalia, where around 720 million euros flowed into locations outside Düsseldorf and Cologne in 2024. That was 38 percent more than in 2023. The northern region, which includes Bremen, Schleswig-Holstein and Lower Saxony, increased by 49 percent compared to 2023. By contrast, the volume in the Rhine-Main region (Hesse, Rhineland-Palatinate and Saarland) fell significantly, by almost 50 percent. Only just under 305 million euros were invested here.
In 2024, the most capital flowed into office and commercial buildings in Bonn, Hanover and Leipzig. This puts three prominent and traditionally transaction-rich cities at the top. However, it is also noteworthy in which cities hardly any transactions took place. In Wiesbaden, Nuremberg and Dresden, very few office transactions took place. The absence of large-volume core transactions is particularly noticeable here. The total number of transactions rose slightly to just over 150 deals, but the average deal size was only around 15 million euros.
Transaction volume office-retail mix buildings outside the Top 7 markets and in Tier 2&3 cities (in bn. €)
Transaction volume by region
Outlook: More positive overall sentiment also leads to more transaction momentum outside the top 7
In 2025, especially in the second half of the year, we expect moderate growth in transaction volume in the commercial real estate market in general. As a result, we also expect more dynamism in the B&C cities. In view of increased planning security with regard to the interest rate environment and financing costs, investors are becoming more decisive again.
In order to avoid the increasing competition for core properties in the top 7, economically strong B-cities are a good choice in 2025. Attractive returns can be achieved here with less competition. At the same time, investors benefit from less volatile office leasing markets and lower office vacancies than in the top 7.