Chapter 2Letting market

New construction activity in 2025 was slightly below the previous year’s level, with a completion volume of around 1.3 m sqm and an occupancy rate of 66%. The project pipeline of around 1.4 m sqm expected for 2026 is directly in line with the volume of the two previous years. Looking ahead to 2027, it is foreseeable that the project volume will decline by around 25%. There are significant differences between the top 7 locations. While Berlin will still see a comparatively high volume of new construction coming onto the market in 2026, at 616,500 sqm, the pipeline will almost halve in the following year. A similar trend can be seen in Hamburg and Stuttgart. In Dusseldorf, the declines are even more pronounced. With only two project developments planned for 2027, new construction activity there will come to a virtual standstill. Frankfurt and Cologne, on the other hand, are moving sideways. Only in Munich does an increase to 348,500 sqm of new construction space indicate a recovery.

Despite the limited development pipeline, it is important to note that not all newly built space will be absorbed immediately and, in some cases, will enter the market as vacant stock from the outset.

Moreover, large-scale lettings are predominantly linked to new development projects and therefore do not translate into a reduction of existing vacant space. The market also continues to be characterized by negative net absorption. Space returns and consolidations exceed demand, meaning that additional vacancy can emerge even in the absence of significant new supply. Overall, owners remain challenged to future-proof their assets and align them with evolving occupier requirements and demand patterns.

Prime rents continued to rise in six of Germany’s top 7 office markets, remaining above the prior-year level. This development is primarily driven by sustained demand for high-quality, modern office space. The strongest growth was recorded in Munich (59.00 €/sqm) and Frankfurt (54.00€/sqm), both posting double-digit increases of around 10%. Hamburg followed with a 9% rise to 38.00 €/sqm m. Berlin, Dusseldorf and Cologne saw moderate prime rental growth of around 5%. Stuttgart was the only market to decline, with prime rents down 3% to 36.00 €/sqm, marking the first decrease in some time. Average rents showed a more mixed performance. The strongest increases were recorded in Frankfurt (+24%), followed by Hamburg and Munich with +10% each. Dusseldorf and Cologne posted modest growth of 1% respectively, while Stuttgart (-17%) and Berlin (-11%) registered declines.

By contrast, standing stock that is not undergoing revitalisation and therefore has no prospects for sustainable use is likely to see sideways movement at best. Differentiation is also evident in central locations, where top-quality products continue to prevail, while less modernized spaces are noticeably losing their appeal, even in CBDs.

In 2025, consulting firms are once again the strongest sector with 363,300 sqm of space turnover (around 14% of total turnover). This is followed by the manufacturing industry with 13%, although its space turnover is heavily concentrated in Munich and Hamburg. The public sector ranks third with 13%. The banking and finance sectors saw significant growth. Large-volume deals increased space take-up by 46% to 237,000 sqm. Also noteworthy is the development of the research and development sector, which, driven by structural megatrends, is showing largely cyclical independence and recorded growth of almost 45% on the previous year’s figure to 87,400 sqm. Due to a lack of specialized existing space, almost half of the space turnover in this segment is attributable to project developments.

Despite regional differences, the overall result for 2025 is above expectations due to increased market activity and signals a positive development in both space take-up and rental dynamics. The continuing rise in prime rents coupled with rising vacancy rates highlights the profound structural change in the market and the increasing gap between premium products and unrenovated existing space.

In view of further large-scale demand on the market, office take-up of around 2.7 m sqm in 2026 appears realistic.

However, economic stimulus is needed to bring about a more pronounced upward trend. If the planned measures prove effective and stimulate growth, a stronger increase in space take-up can be expected on the office rental markets in the medium term.

According to the latest IW Cologne study, Chinese industrial goods and mechanical engineering products are increasingly reaching Europe via alternative, modified routes, which is strengthening Germany’s role as a target market. This development is also increasingly being noticed across all sectors of the German industrial and logistics real estate market, from logistics service providers and retail companies to manufacturing.

While the share of Asian companies averaged around 3% over the past five years, they generated around 10% of nationwide space turnover in 2025. North Rhine-Westphalia is benefiting from this development for historical reasons. Here, the share of Asian users across all sectors was remarkably high at almost a quarter, with both large central warehouses and smaller units for last-mile services being leased. It can be assumed that this trend will continue to strengthen in 2026 and will have a significant impact on demand development in the German market.

Despite a few large deals, users in 2025 focused primarily on the small-scale space segment up to 3,000 sqm. Just under two-thirds (65%) of all deals were concluded in this segment, but they accounted for only 20% of space turnover in the top eight regions and remained stable yoy.

Due to the large deals, the strongest user group among the top 8 markets was logistics service providers, accounting for 33% of space take-up, followed by retail companies with a share of 30% and the manufacturing industry with 22%.

Logistics service providers were able to maintain their leading position in the top 8 markets thanks to several large deals in the first half of the year, but manufacturing companies accounted for most of the deals. Most tenants were from the skilled trades/construction and mechanical engineering sectors.

On average, tenants leased 3,400 sqm per deal, compared with 7,600 sqm per transaction among logistics providers. More broadly, the most resilient demand is currently coming from the multi-let business park segment, where occupiers from the leisure and events industry were particularly active in 2025.

After a period of consolidation, activity in the e-commerce sector is expected to pick up again, driven by Asian online companies and Amazon. The automotive industry, on the other hand, remains cautious when it comes to leasing. The shift to electric mobility, digital production processes, and geopolitical uncertainties are slowing demand. Only the EU’s decision to delay the phase-out of combustion engines could lead to slightly positive momentum. The delay gives automotive companies some time to better respond to structural changes and the eventual phase-out of combustion engines, to adjust their production accordingly, and to better plan their investments. At the same time, the defence industry is gaining importance. Rising defence spending and security policy requirements will lead to increasing demand from 2026 onwards. The first leases and expansion plans were already registered in northern and southern Germany in 2025. For 2026, there will be more movement in the market and a result that is slightly above the 2025 level.