Thursday, 18 December 2025
Germany’s real estate market is expected to move into 2026 in an early-cycle phase marked by a gradual economic recovery and initial signs of stabilization, according to Colliers’ German Real Estate Market Outlook 2026. The report highlights a market environment influenced by long-term structural factors such as demographic change, globalization trends and ESG requirements, with selective opportunities emerging across several sectors.
Transaction activity continues to be driven mainly by private and international investors, while institutional capital remains more cautious and selective. Prime rents are still increasing in several segments, development activity is declining across most asset classes, and office vacancy rates in Germany’s seven largest cities are expected to reach a new peak. At the same time, Colliers identifies residential, industrial and logistics, hotels and specialist sectors such as life sciences and data centres as areas of growing relevance.
Felix von Saucken, CEO of Colliers Germany, said: “The German real estate industry is undergoing a phase of reorganization – shaped by geopolitical tensions, higher financing costs, and demanding regulatory frameworks. At the same time, the early-cycle market phase offers diverse opportunities for investors who act flexibly and focus on quality.”
Investor sentiment is described as cautiously optimistic. Private investors and family offices remain key market participants, taking advantage of current pricing conditions to target core and core-plus assets. Institutional investors are acting more selectively, while international capital flows are gradually increasing again, particularly from Anglo-Saxon countries, France, Asia and the Middle East. Alternative financing solutions, including private debt, are also gaining importance.
Francesca Boucard, Head of Market Intelligence & Foresight at Colliers Germany, commented: “2026 will be a year in which investors not only react to market movements but actively shape the transformation of the real estate market. Private investors and family offices use the early-cycle phase to acquire high-quality assets at attractive conditions. Institutional investors remain selective, increasing the supply of value-add products and creating new opportunities for professional asset management strategies.”
Boucard added that economic and property cycles remain closely linked but do not move in perfect sync. “While the overall economy is characterized by slow recovery, the real estate market also shows initial signs of stabilization. A key difference lies in reaction speed: the economy responds more quickly to external shocks and political measures, while the property market follows with a delay due to longer planning and investment cycles.”
The outlook assumes moderate economic growth of around 1.1 percent in 2026, easing inflation and a stable employment environment.
In the office sector, demand is stabilizing, particularly among larger occupiers, while development activity is expected to decline significantly from 2026 onwards. Prime rents in central locations are forecast to continue rising, driven by demand for high-quality, ESG-compliant space. In peripheral locations, rents are expected to remain largely flat, widening the gap between prime and secondary assets. Initial yields in Germany’s Top 7 cities are projected to range between 4.25 percent and 5.00 percent.
“The investment market is finding new momentum under more realistic conditions and has the potential to mark the beginning of a new cycle. 2026 will be the last year with a high project development pipeline before availability drops significantly from 2027 onward,” Boucard said.
The residential market continues to face a structural supply shortage. Despite political initiatives aimed at accelerating construction and supporting social housing, completions are expected to reach around 175,000 units, well below demand. Household numbers continue to grow, and rents in major cities are expected to rise by at least 5 percent in 2026.
Felix von Saucken noted: “In 2026, rising housing demand meets a shrinking supply. New construction remains at a low, the construction turbo has yet to take effect, and rents continue to climb. Only the investment market shows noticeable revitalization, with a growing focus on younger properties and slight yield compression in some submarkets.”
In the retail sector, consolidation and changing consumer behaviour remain key themes. Retail parks, grocery-anchored formats and discount concepts continue to attract investor interest, while city centres increasingly rely on mixed-use developments and service-oriented uses. In logistics, demand is supported by e-commerce and defence-related activities, alongside ongoing consolidation among industrial and contract logistics operators. Strategic locations and flexible, specialised assets are expected to perform best.
The hotel market is benefiting from rising domestic and international travel demand, with office-to-hotel conversions playing a growing role as new-build activity remains limited. Transaction volumes in the sector are expected to range between €1.9 billion and €2.2 billion. At the same time, specialist sectors such as life sciences and data centres are gaining momentum, supported by strong demand for research space, digital infrastructure needs and political backing.
Summing up the outlook, Felix von Saucken said: “The real estate market is in transition: 2026 will be a year of market reorganization and shifting demand profiles. At the same time, opportunities open up for investors and market participants who act flexibly and focus early on growth segments. In this environment, resilience, efficiency, and future viability will be decisive for sustainable success in the German real estate market.”
