Germany’s development market in freefall as new projects collapse

Germany’s real estate development sector is experiencing its deepest slump in decades, with new project volumes collapsing and the pipeline shrinking to levels not seen since before the financial crisis. According to a new study from bulwiengesa, overall project development volume in Germany fell by a staggering 73% year-on-year in 2024. Residential construction, which had long propped up the sector, plummeted by 76%, while commercial developments shrank by 66%.

"The market is in freefall," said Felix Embacher, Head of Real Estate Analysis at bulwiengesa, presenting the findings in early July. "Developers are no longer initiating new projects, and without a stabilising impulse, the contraction will continue well into 2026."

The report paints a sobering picture: development pipelines in Germany's A-cities have thinned dramatically, with project cancellations and delays becoming the norm. Inner-city sites, once hotly contested, are now languishing as financing hurdles and construction cost inflation combine with regulatory uncertainty to derail feasibility.

At the same time, the Ifo Institute reports a record number of project cancellations and a sharp rise in unused building permits. "Order backlogs are shrinking, and many developers are hitting pause," said Klaus Wohlrabe, Head of Surveys at the Ifo-Institut. "Our indicators show a clear downturn in sentiment, particularly among residential developers."

"Bau-Turbo" aimed at streamlining planning procedures

Against this bleak backdrop, the German government has rolled out a legislative initiative designed to reverse the decline. The so-called "Bau-Turbo" law, championed by new Federal Construction Minister Verena Hubertz, aims to streamline planning procedures by amending the Building Code (BauGB). The centrepiece is Section 246e, which allows for far-reaching deviations from existing development plans and zoning requirements—provided municipalities give their consent. The measures are set to remain in effect until end-2030.

The changes include faster permitting without the need for formal Bebauungsplan procedures, the ability to convert and repurpose existing buildings, and temporary relaxations of noise protection requirements. However, implementation depends on municipalities, and many within the industry remain sceptical.

"Provided there is political will in the municipalities, something good can come of this," said Dirk Salewski, President of the BFW (Federal Association of Independent Real Estate and Housing Companies). "But we are not seeing this resolve in all cities, particularly the larger ones."

Others are more blunt. Axel Gedaschko, President of the GdW (Federal Association of German Housing and Real Estate Companies), warned in a recent interview that even if bureaucratic barriers are eased, many developers remain hamstrung by costs and interest rates. "The fundamentals haven't changed," he said. "Unless construction becomes more affordable, no amount of acceleration will help."

The sentiment is echoed in the private sector. Iris Schöberl, Managing Director of Columbia Threadneedle and president of the nationwide real estate lobby group ZIA, remarked at a recent event: "Project development is no longer about returns, it's about damage control. We are navigating unprecedented levels of planning risk and regulatory friction."

Potential loss of a generation of developers

Greyfield Group, which focuses on sustainable urban redevelopment, warns of losing a generation of mid-sized developers. "We are seeing many SME developers pulling out altogether," said a spokesperson. "The financing environment is too tight, and political promises have lost credibility."

The insolvency wave among developers and contractors is building. Creditreform reported a 21.7% rise in construction-related insolvencies in the first half of 2025, while transaction volumes remain at record lows. Some investors are already repositioning, targeting distressed opportunities or landholdings with long-term optionality.

Still, some see the current rupture as a necessary correction. "There had been too much speculative building, especially in overheated urban cores," said André Adami of bulwiengesa. "What we need now is a shift towards more demand-driven, viable development—and a more reliable policy framework."

Whether the Bau-Turbo measures will be enough to halt the slide remains unclear. The draft legislation is expected to pass the Bundestag in autumn, but with many municipalities reluctant to engage, the window for meaningful impact may already be narrowing.