Ongoing reticence on Germany’s office real estate investment market

  • Transaction volume in the first three quarters sheds 79 percent to €4.1 billion year on year
  • Average prime yield across the Top 7 markets climbs by 0.53 percentage points to 4.6 percent in the third quarter
  • Virtually no large-scale transactions from institutional investors

Germany’s office real estate investment market registered a transaction volume of €4.1 billion in the first three quarters of 2023. Compared with the same period last year, this marks a decline of 79 percent. Only around one fifth of the investment volume was attributable to foreign players who originated principally from European countries outside Germany and from Asia. In the large-scale segment above the €100 million mark, the number of deals contracted by 83 percent and by 90 percent in terms of volume measured against the average of the past five years. These are the results of a current analysis prepared by the global commercial real estate services company CBRE.

Fabian Klein, Head of Investment

The repricing process is not finished yet, especially in the large-scale segment, and institutional investors in particular are being very cautious. As a result, the third quarter saw only one transaction above the €100 million mark that, as is typical for the current market situation, took place in the form of a participating investment by a high net-worth individual. There will be further yield increases for office properties in the direction of five percent and more.

Fabian Klein, Head of Investment

At the end of the third quarter of 2023, office prime yield as an average of the Top 7 locations was running at 4.6 percent, a good 0.5 percentage points quarter on quarter and around 1.9 percentage points above the historical lowest point at the turn of the year 2021/2022.

Dr. Jan Linsin, Head of Research

Plus the bank margin and the risk premium, it comes as no surprise that pricing needs further correction, particularly in the large-scale segment with institutional players in Germany and abroad. 

Dr. Jan Linsin, Head of Research

Moreover, financing interest, measured in reference to the 5-year EURO Swap Rate for instance, currently stands at 3.2 percent and the risk-free rate in the form of the 10-year Bund at more than three percent at the end of the third quarter. The benchmark yield alone has gained two percentage points in the last 18 months. Investors have priced this yield increase into their potential real estate allocation and consequently require an adequate risk premium to mitigate the risks of investing in tangible assets. As Klein adds: “What is more, banks are generally less willing to lend. Against the backdrop of interest rates trending down, this is likely to be a topic that will engage the attention of investors for years to come – especially when investing in office properties.”

The strongest net buyers consisted of open-ended real estate and of special funds in particular, followed by the public sector and asset/fund managers. In absolute terms, private investors proved to be the second strongest buyer group with investments of a good €800 million, while also selling around just as much.

Some 69 percent of the office investment volume was accounted for by the Top 7 locations with just under €2.9 billion and approximately 69 percent – this compared with 80 percent over the same period in 2022. Investors are increasingly seeking alternatives in B locations and regional centers with a view to securing attractive properties with significantly smaller lot sizes. The transaction volumes in these locations declined by only 67 percent in a year-on-year comparison as against 82 percent in the top locations. A quarter of the overall volume was nevertheless attributable to Berlin. Hamburg took second place with 12 percent, with Munich hot on its heels with 11 percent. 

Outlook for the full year 2023

“In terms of the full year, we are anticipating a transaction volume of six billion euros on the office real estate investment market at most,” Klein says.

Linsin adds: “We are expecting to see inflation ease slightly in the coming months owing to the economic slowdown induced by monetary policy. The core inflation rate is nevertheless set to remain intransigently high. Further interest rate hikes by the ECB cannot therefore not be ruled out yet. After the ECB’s last tenth interest rate move in a row, we may have reached the peak. If this heralds the end of strong inflation, interest rates may be lowered again. For the moment, however, the economy and the real estate sector need to adapt to the new, higher interest rate regime and adjust their business models and investment strategies.”



Fabian KleinDr. Jan Linsin
Head of Investment GermanyHead of Research Germany
+49 (0)69 17 00 77 671+49 (0)69 17 00 77 404

About CBRE

CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has more than 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.

CBRE Germany has been represented by its head office in Frankfurt am Main since 1973; there are further branch offices in Berlin, Düsseldorf, Essen, Hamburg, Cologne, Munich and Stuttgart.