Office investors edge back as German market steadies around core

Germany’s office investment market, long mired in uncertainty, is showing early signs of stabilisation—though mainly in the safest segments. Investors are returning, selectively and cautiously, with a clear focus on core and core-plus strategies. Transaction volumes remain subdued, but liquidity is improving in the top tier of the market, and pricing expectations between buyers and sellers are beginning to converge.

Total office investment across Germany reached €2.1 billion in the first half of 2025, according to CBRE. This figure represents a 23% decline compared to the previous year, held back by a particularly weak second quarter (€765 million). The number of transactions declined only slightly, but average deal size dropped 17% year-on-year to just over €21 million. Portfolio transactions were rare, accounting for just 7% of the total.

Still, there are signs of renewed traction. Capital continues to concentrate in prime, liquid assets, with 62% of funds flowing into core and core-plus properties—up from 2024. Prime yields across Germany’s Big 7 cities have held stable since the start of the year, averaging 4.96%, and large deals such as Berlin’s Upper West and a property on Munich’s Rosenheimer Straße suggest appetite is returning for trophy assets in central locations. Notably, international capital is regaining ground: foreign investors accounted for 30% of H1 transaction volume, compared to just 12% in the same period last year.

CBRE sees the market mood as improving, albeit unevenly. “The office property investment market remained cautious despite a few large deals, partly due to the uncertain economic situation,” said Kai Mende, CEO of CBRE Germany. “Once the economy picks up again, the office investment market should also recover.”

The shift toward prime is largely being driven by capital preservation strategies. “Investors have recently been focusing primarily on security when it comes to office investments: core is clearly the focus,” said Marcus Lemli, Head of Capital Markets at CBRE.

Prime assets regain momentum

JLL’s latest data points to a similar core-led rebound, with office investment volume across the five major cities it tracks rising to €1.6 billion in the first half of 2025—up from €1.4 billion the previous year. Although Q2 activity dipped due to the absence of major transactions, a growing number of bidding processes for prime assets is helping to anchor pricing. The depth and breadth of investor interest is increasing, particularly in deals exceeding €100 million.

The positive shift is reflected in the performance of the Victor Prime Office Index, JLL’s long-running measure of capital value changes in Germany’s top office locations. The index tracks pricing and rental performance in prime districts of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich. It rose by 1.2% in Q2—an improvement on the 0.4% recorded in the previous quarter—and is now up 2.8% year-on-year. It marks the third consecutive quarterly increase, signalling the first simultaneous uplift from both rental growth and yield compression since the start of the downturn in early 2022.

“The positive signs on the office investment market are increasing and strengthening,” said Ralf Kemper, Head of Value and Risk Advisory at JLL Germany, “although they are not yet manifesting themselves in a significant rise in transaction volume.”

Munich remains the strongest performer by some distance. The city’s prime office segment saw index growth of 3.5% in Q2, driven by a 10-basis-point fall in yields and robust rental uplifts. With an index reading of 191.6, Munich continues to outpace its peers in both occupier demand and capital performance. Düsseldorf also gained ground, rising 1.8% to 153.1, while Hamburg saw a 1.0% increase to 185. Frankfurt stagnated at 151.1 points, its gains in top rents offset by weaker performance in secondary locations. Berlin was the only market to post a negative result, with the index falling 0.6% to 179.5, dragged down by softening rental levels in prime areas.

Rental markets overall remain robust. Take-up across the five largest cities totalled just under 1.2 million square metres in the first half of the year, slightly above the 1.1 million square metres recorded in H1 2024. Leasing demand is concentrated on ESG-compliant, centrally located buildings, with corporate services and legal firms particularly active in Munich. Noteworthy relocations such as KPMG’s move from Frankfurt Airport into the city centre and Siemens’ transition from Neuperlach to Munich’s Werksviertel illustrate the shift towards high-quality, well-located office space.

“Since Q2 2022, rising prime yields have weighed on the Victor Index,” said Kemper. “But those negative effects were offset by positive rental strength. Now, we’re finally seeing a return of positive momentum from both the rental and investment markets.”

Capital recovery under way, but only at the top

The investment strategy remains defined by risk aversion. Core assets are attracting deep pools of capital, with family offices and other equity-driven investors dominating the buyer side. According to both CBRE and JLL, this dynamic is beginning to compress prime yields in cities like Munich, Düsseldorf and Hamburg. Although the magnitude of the shift is limited—10 to 15 basis points in some locations—the direction of travel is clear.

Importantly, there is now growing alignment between buyer and seller expectations, particularly in the top tier. “We are seeing that price expectations in the core segment and for absolute, liquid premium products have continued to converge between buyers and sellers,” said Dr. Jan Linsin, Head of Research at CBRE.

Borrowing costs remain competitive. “Swap rates in the eurozone are currently around 1.4 to 1.75 percentage points below those in the US and the UK,” Linsin noted, “which is leading to attractive borrowing costs. However, long-term interest rates have not fallen as sharply as expected, which is limiting the decline in yields in the short term.”

While the market remains far from a broad recovery, the current trajectory suggests that office investment volumes could reach €5 billion by year-end. This would still be low by historical standards, but enough to confirm that the re-entry of institutional capital is underway.

Kemper sees a familiar European pattern beginning to form: “Germany’s real estate strongholds have the potential to follow the usual frontrunners London and Paris, and the expected significant increases in prime rents are likely to drive demand for prime properties.”

REFIRE’s view is that a floor is forming in the prime segment of the German office market. The bifurcation is hardening: buildings in prime locations, offering stable income and ESG compliance, are seeing renewed interest. The rest—particularly value-add stock in weaker locations—continues to suffer from a lack of liquidity, price uncertainty, and a hesitant banking sector. For long-term investors with capital on hand and a clear quality bias, however, the opportunity to re-enter appears to be materialising.