City Survey

Q1 2024

Chapter 4Investment market

4.1Bottoming out on the investment market goes into overtime

Real estate for EUR 7.3 billion was traded in Germany in the first quarter of 2024. Of this amount, EUR 5.7 billion was attributable to commercial real estate and EUR 1.6 billion to the institutional residential segment with 10 residential units or more. The former were thus 11 percent above the result of the first quarter of the previous year and were not quite able to match the slight market revival from the second half of 2023. This also applies to the number of around 240 registered transactions, 90 percent of which were in the size category below EUR 50 million, as in the same quarter of the previous year. In a long-term comparison, the level remains at the low level of 2012.

bn. EUR
transaction volume

Transaction Volume in Germany (in bn. €)

Transaction Volume in Germany by Property Type (in m. €)

Persistent shifts between types of use

Furthermore, significant shifts between the types of use can be observed in market activities. The industrial and logistics real estate sector was able to expand its top position as the type of use with the highest transaction volume, which it achieved in 2023, to 35 percent. Fueled by numerous portfolio transactions, the investment volume in this segment more than doubled year-on-year to over EUR 2 billion. Thanks to parcel sales in the industrial and logistics sectors, but also in the food-anchored retail warehouse segment, the share of portfolio transactions is at a significantly higher level of 24 percent than a year ago. They also make a significant contribution to the geographical dispersion of the investment volume outside Germanies top 7 investment markets.

In contrast, investors remain cautious about large-volume office properties under the impression of structural upheavals. In the past three months, for the first time since the financial crisis, less than EUR 1 billion have been invested in this segment in a single quarter, which means that the market share has fallen to 16 percent and offices continue to occupy only third place among the types of use with the highest turnover. The Munich office and commercial building at Rosenstraße 8, which was to be repositioned by the insolvent Signa Prime Selection as part of the Romy project development measure and has now been sold to a local private investor for around 85 million euros, is the largest office deal in Germany and only ranks 13th among all commercial real estate transactions.

The lack of landmark deals in this segment is having a particularly negative impact on the market activity of the seven German investment centres, which, with a market share of 44 per cent, once again account for less than half of the total German transaction volume. In particular, the withdrawal of institutional investors such as open-ended real estate funds and special funds continues. What was once the strongest investor group has continued to record net capital outflows since August 2023, albeit recently with a slowdown trend.

First interest rate hike decisive for further market revival

The bottoming out in the investment market is going into overtime. The return of investor confidence on a broad basis, especially in the office segment, will only be accompanied by better calculability of investment risk and lower financing costs at the same time.

We expect an easing of tensions from the second half of the year, when the first interest rate cut heralds the end of the reflation phase. In view of the lower inflation in Europe’s core markets, which is increasingly approaching the ECB’s target of 2 percent, this scenario is likely, even if the global economy remains weak and the FED postpones its first interest rate hike.

Properties from insolvencies account for 12 percent of the transaction volume

The transaction volume of retail properties fell by 40 percent and was on a par with the office segment below the 1 billion euro threshold at the end of March. In the previous year, however, one-off effects were also responsible for the top position in terms of market share. Currently, the usage category has fallen back to third place. However, inner-city properties with significant retail stock, such as Munich’s luxury ensemble at Maximilianstrasse 12-14, are making a significant contribution to the fact that mixed-use properties are in second place for the first time with a volume share of 18 percent. At well over EUR 200 million, the aforementioned sale of Centrum Holding, which is also insolvent, to a private investor represented by Commerz Real is one of the 12 major deals in the three-digit million euro range.

This example shows where market activity can currently be observed. Since the beginning of the year, more and more projects and properties have been coming onto the market from project developers who have filed for insolvency since last summer. Here, investors with strong equity capital in particular have attractive opportunities to obtain properties in prime locations that had become unaffordable in the bidding competition of recent years or were not traded at all.

Overall, around EUR 700 million, or 12 percent of the transaction volume, was attributable to such deals in the quarter under review. Measured against the volume of exploitation of commercial real estate, which is in the TOP 7 in the portfolio of supra-regional project developers that have fallen into insolvency and amounts to around EUR 8 billion euros according to the company’s own research, this is only a small part that has reached the market. Portfolio holders, who come under selling pressure due to write-downs or refinancing needs, will also increase product availability on the market in the short to medium term. This is exemplified by the sale of a 14-property retail portfolio of Deutsche Konsum REIT, which was announced shortly before the end of the quarter.

Overall, project developers were the sales group with the highest turnover between January and March at 23 percent. On the buyer side, private investors and family offices were the most active buyer groups for the first time, along with asset and fund managers, each with a market share of EUR 1.1 billion or 19 percent.

Only minor yield adjustments can be observed

Overall, only a few adjustments to prime yields in the TOP 7 have been registered in the past three months. Yields are close, especially in the office segment, with values between 4.50 and 5.00 percent. However, increasing selling pressure and continued wait-and-see demand, especially from institutional capital, could still lead to slight increases in yields in isolated cases.

Gross Initial Yield offices Top 7

Prime Yield Office (in %)

Outlook: Investment market remains wait-and-see for the time being

Compared to the end of 2023, the economic outlook has deteriorated further. According to the leading economic research institutes, more than zero growth is not to be expected for 2024 as a whole, which will put additional pressure on the rental markets. Interest rates remain high, even though decreasing volatility and the realistic assumption of a mid-year rate cut are prompting many investors to increase exploratory activity. The lower number of active buyer groups compared to the boom phase, liquidity tied up by high financing costs and increased capital requirements, as well as price pressure and the focus on small-volume transactions will limit the transaction volume for the time being. Nevertheless, there are currently many interesting opportunities that have already prompted the first investors to invest in real estate again in recent months.

Key figures for the German investment market

German Investment
Markets in
Transaction volume
(in million €) 20
Transaction volume
(in million €) 2023
Change year-on-year
in %
11%-64%-11%25%148%-25%-70 217%-100%
Most Active BuyersPrivate Investors /
Family Offices
Asset Managers /
Fund Managers
76 %
Real Estate Funds/
Special Funds
54 %
19 %
Asset managers /
Fund Managers
Private Investors/
Family Offices
64 %
Most Active SellersProject
Corporates /
Asset Managers/
Fund Managers
Asset Managers/
Fund Managers
Most Important
Property type
Industrial &
35 %
Industrial &
Industrial &
Mixed Use
Prime Yield Office4.90%5.00%4.95%4.80%5.00%4.50%4.80%
Prime Yield Retail5.00%5.00%4.85%4.50%5.00%4.25%4.80%
Prime Yield I&L4.75%

Data as of Q1 2024

4.2Strong start to the year in the German industrial and logistics real estate market

In the first quarter of 2024, around 2.0 billion euros were invested in the German industrial and logistics real estate market. Compared to the previous year, which recorded a below-average result of around EUR 848 million at the level of 2016, more than twice as much was invested. Thanks to a large number of portfolio sales, the logistics sector was the type of use with the highest turnover within the commercial real estate sector, with a market share of 35 percent.

The increasing transaction volume is a positive sign and reinforces investors that the inflection point of the cycle, in terms of market activity, has been reached for industrial and logistics real estate. We expect the first interest rate cuts in the middle of the year, although these are already partly priced in and will only have an impact on pricing later. In the long term, the interest rate cuts will increase the attractiveness of real estate again and bring more liquidity into the market. We remain realistic for the first half of 2024. Core investors continue to keep a low profile, while value-add investors are looking for opportunities. The current weakening demand will shape the tenant market. According to the Ifo Institute, export expectations are brightening somewhat, but overall, the core sectors of industry in particular are currently experiencing a downward trend. In the long term, rents will continue to rise, but growth will continue to slow.

bn. EUR
transaction volume I&L

Transaction Volume Industrial & Logistics (in bn. €)

Forecast from 2024

International buyers shape transaction activity

In the first three months of the year, transaction activity was dominated in particular by international buyers with core-plus and value-add capital. Around 71 percent of the transaction volume comes from abroad. At around 41 percent (of the total transaction volume), the focus was on European buyers. Traditionally, national investors have been mainly active in single transactions. Overall, 16 percent of all transactions took place in the size segment above 50 million euros. After the period of price corrections, this result is solid. Among the most market-relevant single-asset transactions were the purchase of an existing property by the Rewe Group in Bondorf in the low three-digit million range and a new building in the Hanover region, which was purchased by AEW in the upper double-digit million range.

The market-relevant single-asset transactions were predominantly existing properties in good to very good locations, which investors bought at favourable conditions at the beginning of the supercycle. Despite the price corrections in 2023, they are benefiting from the above-average development that the industrial and logistics real estate market has undergone since 2016.

As a result of weakening tenant demand, we expect investors to refocus more strongly on established core markets.

In addition, we continue to register many new entrants who want to increase their allocation to the German industrial and logistics real estate market and have a high interest in logistics properties in established locations with upside potential.

Portfolio sales on the rise since Q3 2023

Since the second half of 2023, an increase in portfolio sales has been registered. In the first quarter of 2024, around 10 portfolio acquisitions took place and were evenly distributed across all risk classes. Overall, these sales accounted for around 41 percent of the transaction volume. The most prominent portfolio purchase was completed by Clarion Partners Europe, which bought six German and two Dutch properties for around EUR 270 million. In the first quarter of 2024, portfolio transactions were predominantly carried out by international core-plus investors. This was also the main reason for the overall high share of foreign funds in the total transaction volume.

In discussions with investors, we have noticed a high willingness to seize the opportunity and set up start-up portfolios at attractive prices. We expect the momentum in the investment market to increase in the coming year.

Yields have stabilized

At the end of the first quarter, the German industrial and logistics real estate market recorded a gross prime yield of 4.75 percent for core logistics properties with an area of more than 3,000 square meters.

There are still significant risks that have an impact on the purchase price factors. Nevertheless, we see that properties in prime locations with tenants with strong credit ratings continue to generate consistently attractive returns.  In addition, we see that there is an increasing demand for special properties overall. For users, the main reasons are legal restrictions and increased demand due to changes in consumption, such as chilled food, or the relocation of production by pharmaceutical companies back to Europe. For investors, the focus is on tenant loyalty, higher barriers to entry and attractive return profiles. Although e-commerce has lost significant momentum over the past year, it remains in demand due to its long-term growth potential.

gross prime yield I&L

Prime Yield Industrial & Logistics (in %)

4.3Investment year off to a quiet start for retail real estate

Retail properties in Germany were traded for around EUR 900 million in the first quarter of 2024. For the second quarter in a row, the transaction volume thus remains historically low below the EUR 1 billion mark and shows a decline of 40 percent compared to the same period of the previous year. After all, compared to the year-end quarter of 2023, both volume and the number of transactions, which rose to over 40, recovered slightly. Overall, the retail segment ranks 3rd among the types of use with the highest investment volume after the first three months of the year – on a par with the office sector. As in the market as a whole, 90 percent of all retail transactions were in the sub-50 million euro category.

m. EUR
transaction volume retail

The current figures do not reflect a significant development in the investment market, which, however, is very positive from a retail perspective. Since the beginning of the year, for example, individual very large-scale properties with significant retail holdings have been sold, which are not included in the retail volume by definition due to their mixed-use character.

These include, for example, the Munich luxury ensemble Maximilianstrasse 12-14, which was sold for well over EUR 250 million by the insolvent Centrum Holding to a private investor represented by Commerz Real. Taking into account such transactions, which for the first time helped the mixed-use category to take second place in the overall market in terms of market share, the previous year’s result of EUR 1.5 billion would have been achieved without further ado.

Transaction Volume Retail (in bn. €)

Transaction Volume by Type of Building

Retail properties from insolvencies account for 22 percent of the transaction volume

The largest retail transaction year-to-date also resulted from the resolution of an insolvent project developer. This involves the takeover of the Centrum Group’s shareholding in the Düsseldorf commercial building K II by the co-owner B&S. Andreas Trumpp, Head of Market Intelligence & Foresight at Colliers: “Around 22 percent of the transaction volume of the last three months came from the liquidation mass of insolvent portfolio holders and project developers, which also includes the Signa Group with its Galeria department stores. The majority of these properties will enter the market in the short to medium term and, due to their locational qualities, will also offer attractive investment opportunities for buyer groups who did not want to or could not keep up with the bidding war of the last boom years. In addition, investors who come under selling pressure due to depreciation or refinancing needs will increasingly put product on the market. For example, the sale of a 14-property retail portfolio of Deutsche Konsum REIT, which had already been announced in December, was confirmed.”

Retail warehouses and retail parks remain sector with the highest transaction volume

The focus of current investor interest continues to be on the retail warehouse segment, which continued to lead all retail property types traded in the quarter under review. The volume share was 61 percent, three-quarters of which was attributable to the food-anchored retail segment. Worth mentioning is the purchase of four large-scale supermarkets and four DIY stores for around EUR  200 million by ORES Germany. The vehicle, which specialises in German high-value retail properties, is backed by the Portuguese real estate company Sonae Sierra and the Spanish Bankinter, which is investing in Germany for the first time. High-street properties – excluding the mixed-use properties mentioned above – are currently in second place with a market share of 26 percent, followed by shopping centers in third place with 13 percent. Around 42 percent of the transaction volume is accounted for by portfolios, the majority of which is accounted for by individual deals.

More evidence for pricing of retail warehouses

Sellers and buyers have taken a big step towards each other in terms of price discovery in recent months, given the fact that specialist market yields have only come under price pressure at a late stage. Currently, prime yields for grocery stores are 5.40 per cent (gross). Retail parks with food anchors are quoted at around 5.70 percent. Numerous incoming bids for properties on the market also point in this direction. Based on these prime values, the yield requirements increase significantly with rising property size and decreasing share of food retailers. In the area of high-street properties in the German top seven investment markets, there is still a lack of transactions that allow a clear derivation of the current yield level. The insolvency sales described above are only suitable to a limited extent as an indication of market returns. The persistent reluctance to buy by traditionally highly committed institutional investors, such as open-ended real estate and special funds, indicates that the pricing process has not yet been completed.

Gross initial yields for food-anchored retail

Outlook: Market recovery expected in the coming months

As in the investment market as a whole, the bottoming out phase of retail investments is also being extended. The expectation of a first interest rate cut by the ECB before the end of this year is already anchored in the minds of many players. However, interest rates will remain high compared to the average for the years 2018 to 2021. Challenges such as high refinancing and investment requirements remain a constant companion, especially for large portfolio holders.

Since, according to our observations, new players are actively preparing to enter the market for investments in food-anchored retail warehouse properties and the allocation of multi-asset real estate funds is shifting towards this product class, we expect a clear market revival in the next three to nine months. 

Prime Yield High Street (in %)

4.4Subdued start to the year in the residential investment market in 2024

The first three months of 2024 were more subdued than expected in the institutional residential investment segment with a transaction volume of EUR 1.6 billion, while the positive momentum of the strong fourth quarter of 2023 could not be carried over into the new year. Transaction volume for the first three months of 2024 was 6 percent lower than in the previous year. At EUR 360 million, portfolio transactions accounted for only around 23 percent of investment turnover, compared to 61 percent of 2023 as a whole, which was still strongly influenced by portfolio transactions.

Of the total transaction volume, 51 percent or EUR 809 million was attributable to the A cities (full year 2023: 68 percent) with a concentration in Berlin (around EUR 630 million). In particular, the sale of Bauwens’ Greenpark project in Berlin to Greystar Real Estate Partners with a volume of around 225 million euros as a forward deal, which was also the first major forward deal of a single project in recent months, had a significant impact on the market.

After the price expectations of buyers and sellers converged and more transactions crossed the finish line at the end of 2023, the start of the year was subdued. The low transaction volume resulted from the lack of large portfolios, which we expect to be on the market later in 2024. The prime yields of 3.85 percent for existing properties in A-cities and 4.50 percent in other locations were also confirmed at the beginning of the year and represent the new yield level after the price correction.

bn. EUR
transaction volume residential

Projects and forward deals with higher demand

On the product side, general demand continues to be strongly focused on existing properties. In terms of transaction volume, however, the lack of large existing portfolios led to a significant increase in the share of forward deals and new construction projects in the transaction volume in the quarterly result, reaching 56 percent in the first three months of the year. The yield for the latter is stable at 3.80 percent in the A-cities and 4.30 percent in other locations.

The micro-living segment was also subdued at the beginning of the year, with prime yields rising again slightly by 15 basis points to currently 4.3 percent in the A-cities.

Strong rent growth continues at the beginning of 2024

The strong rent growth of recent years continued in 2024. In the A-cities, asking rents in the existing and new-build segments have already risen by around 3 percent each in 2024 as yet. In the existing segment, rents rose in all A-cities, so that the average rent of all A-cities currently stands at almost 16.00 euros/m², with Berlin showing the strongest growth of almost 5 percent. In the new-build segment, the largest increase was seen in Hamburg at 4 percent, while rents stagnated in Düsseldorf and even declined in Stuttgart (minus 5 percent).

rental growth in the tier 1 cities in Q1 2024

Due to the expected massive decline in new residential construction – the approval figures that fell again at the beginning of the year recently confirmed this – and the resulting shortage of supply, Colliers expects rents to rise significantly in all segments in 2024 as well.

Outlook: Further market recovery expected in 2024 – rents on an upward trend

The long-term drivers resulting in rising demand for housing remain intact, even though building permit numbers continued to decline at the beginning of the year. The high demand for housing combined with insufficient supply is the basis for further rent increases. We therefore expect significant rental growth in A-cities in 2024.

The mood among the players is generally good and the will to invest in housing is great. With a financing environment expected to stabilize and financing costs to fall slightly in the second half of the year, Colliers expects higher investment activity over the course of the year.

Young and ESG-compliant portfolios will continue to be in the focus of investors. On the buyer’s side, demand will be driven by institutional capital, with a focus on private equity, as well as by equity-rich investors such as family offices. It can already be observed that the number of players is growing. On the sell-side, large portfolio holders, project developers and distressed sellers in particular will be more active over the course of the year due to liquidity pressure.

The full-year result will depend in particular on how the sales and portfolio adjustment processes of large portfolio holders as well as sales from insolvencies develop over the course of the year. With the sale of the Greenpark project to Greystar, the project and forward deal segments again showed their first positive signs – if this continues, this should support the overall market. Despite the subdued start to the year, Colliers believes that a full-year result of more than 10 billion euros is possible in an improved overall environment for residential real estate.

4.5B&C: Investments in office and commercial buildings in small and medium-sized towns almost at the level of the top 7

In 2023, around EUR 2.6 billion were invested in office and commercial buildings outside the top 7, a significant decline of 62 percent compared to the previous year. In the top 7, the decline in transaction volume was 84 percent. The number of transactions in B, C and D cities has fallen by more than half compared to 2022. Portfolio transactions accounted for only a very small share of less than 10 percent of the investment volume. Furthermore, the absence of international investors, who are traditionally represented in B & C cities, is not as strong as in the top 7 anyway. Only 11 percent of the investment volume was accounted for by investors based outside Germany. In recent years, their market share has regularly been between 20 and 35 percent.

There is no doubt that we can look back on an investment year that was marked by a high degree of uncertainty, numerous crises and a search for guidance in price discovery. The reluctance on the part of investors in view of the discussions about the future of the office as well as the fundamentally changed framework conditions in the financing environment are also evident outside the top 7.

bn. EUR
transaction volume in office and commercial buildings outside the top 7

Notably, the gap between the top 7 and B, C, and D cities has historically never been as small as it is in 2023. In the top 7, just over EUR 500 million more were invested in office and commercial buildings than outside.

Normally, volumes in the top 7 are at least 3 times higher than in B, C and D cities.

Pricing advanced, but not over yet

Analogous to the top 7 cities, prime yields in B&C cities have continued to move upwards. In the unweighted average of the 14 B cities examined, the prime yield for first-class office and commercial buildings in central locations was 5.20 percent at the end of 2023 (+60 basis points compared to the previous year), the first time since 2017 that it was below 20 times the annual net rent. In C-cities, very good office and commercial buildings were available for an average of just over 17 times or around 5.85 percent (+80 basis points compared to 2022) prime yields.

In view of the low number of transactions, especially for premium properties, it is difficult to make statements about pricing.

gross prime yield in B-cities

We expect to have seen the strongest increase in yields outside of the top 7 as well. However, we believe that the adaptation process is not yet complete.

 In the medium term, we expect a further slight increase in prime yields in central locations of B cities to around 5.35 per cent and in C cities to around 6.00 per cent. In recent months, the 5- and 10-year swap rates relevant to real estate financing have fallen sharply. However, they will be at a higher level this year than they were in mid to late 2021, so investors who rely on debt capital will no longer be able to pay the prices they did 24 months ago. However, from the middle of the current year and depending on further interest rate developments, prime yields could fall again somewhat.

Transaction volume office-retail mix buildings outside the Top 7 markets and in Tier 2&3 cities (in bn. €)

Transaction volume by region

Outlook: Stable rental markets offer attractive conditions after pricing

Especially in the last two months of 2023, we were able to observe the first small signs of a market recovery. Investor interest in office and commercial buildings outside the top 7 has increased again in view of the price adjustments that have already taken place and the stable user markets. Basically, the latter are characterized by a healthy ratio of demand and supply in most cities. Although the number of completions has risen recently, it is coming from a low level and at the same time with predominantly low vacancy rates. Furthermore, the topic of working from home is less pronounced outside the top 7 with the mostly medium-sized tenant landscape than in the top 7 with numerous large companies.

Prime Yield Office (in %)