Special Fund investors are doubling down on Germany

Institutional investors may be pulling back on fresh allocations, but when it comes to real estate Spezialfonds, their affection for domestic bricks and mortar remains undimmed.

New data from Kommalpha shows that in Q1 2025, German real estate special funds attracted €1.3 billion in net inflows—a 14% drop compared to Q1 2024. But interesting: while inflows are weakening, there are no signs of an investor exodus. On the contrary, pension funds and insurers appear to be sitting tight, with allocations holding steady or even ticking upwards.

January accounted for the bulk of activity, with €841 million in inflows— suggesting a burst of optimism at the year’s outset. Things cooled quickly: February and March together contributed just €462 million. Still, across all investor categories, the market held firm. Pension funds added €547 million, insurers €318 million, and credit institutions €393 million, though the latter posted a €57 million drop compared to last year. Only private non- profits posted net outflows.

But here’s the most revealing figure: 90.3% of all developed land in these funds is still located within Germany. That’s €126.1 billion out of a total €139.6 billion in portfolio value. In 2010, the domestic share was just 62.2%. The rest of the eurozone now accounts for a mere 7.7%, and non- eurozone exposure has dwindled to just 2%.

If investors are seeking safety, it seems there’s no place like home. Legal hurdles, currency risk, and local familiarity continue to trump cross-border diversification.

Meanwhile, Kommalpha’s long-term CAIPI index, which measuries two- year inflow momentum, has dropped to 53.9, down nearly 50% on its previous cycle. Yet its recent stability suggests the freefall may be bottoming out.