Germany's Commercial Real Estate Market Sees Cautious Growth in Early 2025

Germany’s commercial real estate sector has posted a second consecutive quarter of price growth, with a 2.3% increase recorded by the Association of German Pfandbrief Banks (VDP) in Q1 2025. This marks a potential sign of recovery after one of the deepest real estate downturns in decades. Still, as Reuters reports, experts remain cautious despite the positive trend.

The Q1 2025 increase significantly outpaced the modest 0.5% growth seen at the end of 2024 — the first uptick after a continuous decline that began in 2022. That period saw plummeting prices, widespread developer bankruptcies, and a near-halt in market transactions.

VDP President Jens Tolckmitt welcomed the Q1 uptick but warned against interpreting it as a definitive turnaround. He pointed to persistent risks including global trade tensions, high debt levels that may trigger rate hikes, and still-low transaction volumes.

The commercial segment — including office and retail space — remains under pressure, while residential real estate shows more resilience. Price growth and an increase in mortgage activity suggest partial recovery in that sector.

Additional data confirms moderate market revival. According to a CBRE report, total transaction volume across all asset classes rose 17% YoY to €7.4 billion. Residential deals accounted for €2.2 billion (30%). Offices came second, helped by a major Upper West transaction. In logistics, absorption fell 6% YoY to 1.26 million sq. m — 20% below the 10-year average. Around 40% of total market investment came from mid- and large-scale transactions.

Colliers puts total German market volume at €7.7 billion (+5% YoY), with €5.2 billion in commercial deals — 9% lower YoY. However, deal count in the commercial segment rose 10%, surpassing 260 transactions. Residential volume surged 56%.

Across Europe, commercial property markets remained subdued. According to MSCI, Q1 transactions totaled €41 billion — down 11% from the previous quarter, one of the weakest levels since 2012.

Investor focus remains on prime offices in major CBDs, with limited activity in peripheral zones — a sign of increased segmentation and strategic reassessment across the continent.