Composite: SONAR Real Estate, REFIRE
REFIRE: SONAR's transaction volume has nearly tripled this year. What's driving the recovery?
Christoph Wittkop: "Investment willingness has returned across most asset classes. In the first three quarters of 2025, we've transacted around €250 million—€225 million in acquisitions, €30 million in sales. That's nearly triple last year's €90 million, split approximately 50-50 between office and logistics.
We've also secured two significant new asset management mandates. The decisive factor was our ability to offer combined property and asset management services under one roof."
The office sector remains deeply polarised. Where do you see the dividing lines?
"The office market requires differentiated analysis. In core properties—good offices in the top seven locations—buyers are returning, primarily family offices and select institutional investors. People have recognized that offices are still needed, but no longer everywhere and not in the same scope. The panic in prime locations is over.
However, secondary and tertiary locations remain extremely difficult. We see clear price decay, yet few transactions. Banks won't finance properties with even minor deviations in quality, location, or developer profile. Since they can cherry-pick, everything in secondary markets gets pushed over one edge.
Office factors of eight to eleven times annual rent no longer surprise anyone in the prime segment. But for established offices in secondary cities, the situation remains challenging. I remain convinced that opportunities exist in some of these assets if investors examined them more carefully."
You've been active in logistics, residential, and food-anchored retail. Are value-add strategies working at current pricing?
"We're actively positioning across several sectors. In logistics, we recently acquired two properties for approximately €100 million with private equity backing. Activity is lower than peak years, but significantly more robust than the past two to three years.
Residential is moving again—institutional investors with available capital and family offices are looking at housing, though more cautiously than in top times. We're also focused on food-anchored retail with grocery anchors. It remains a niche asset class, but reasonably stable at new price levels.
The challenge with Anglo-Saxon capital in value-add office is achieving viable business plans in good locations. Prices haven't fallen enough to make opportunistic business plans work automatically. Though that's changing as we see more transactions where core properties sell at good prices after successful asset management plans."
You've secured Adesso as Prisma's first tenant—but Prisma has 44,000 square metres in non-CBD Frankfurt. How realistic is full occupancy in Niederrad?
"After two years of comprehensive renovation, securing Adesso was crucial. They're moving within Niederrad—initially it wasn't certain they would stay, but we convinced them. The challenge with a building this large is that nobody wants to be the only tenant. That's why the first tenant had to be substantial to create momentum.
Our strategy is straightforward: this property is completely renovated, ESG-wise top quality, and one S-Bahn station from Hauptbahnhof. Rental levels are significantly below CBD rates. As CBD rents continue rising, enough companies will emerge that either can't afford or don't want to pay those levels. We're not compromising on quality, but tenants save considerably on location.
I believe tenants relocating within Niederrad into new buildings is more likely short-term than CBD-to-Niederrad moves. But there's potential among other candidates in the quarter—companies wanting to reduce space while upgrading quality.
For other owners with similar secondary assets: if you don't want fire-sale prices and don't want to close the building, you must bring it up to modern ESG standards. There will be too much office space in locations like Niederrad, but many owners won't invest. You need to look at quality-comparable supply, not total supply. We'll see stranded assets where there's no money for necessary measures. In secondary locations, renovation and ESG compliance aren't optional—they're the baseline for rentability."
You're exploring office-to-residential conversions and modular wood construction. Strategic pivots or opportunistic experiments?
"We're converting two Eschborn office buildings to residential. It's complex—significant challenges from planning and construction perspectives. The building must be suitable, technology requirements must work cost-effectively, and location should be attractive for residential use.
Our Eschborn properties work because they're in the town center, not the office conglomerate— actually more residential than office location. But that prerequisite must exist first. Wrong location with no infrastructure means it's hardly worthwhile.
On modular wood construction, an investor with connections to a wood module manufacturer approached us. It's future-oriented. We have one Hamburg project and we're seeking others. The jury is still out on whether financial expectations will be met, but interest is substantial. We'll see whether you can achieve a premium for building with wood."
Anglo-Saxon debt funds have capital but aren't deploying it, while banks cherry-pick. What needs to change?
"Good projects can still get 40-60 percent LTV financing. However, much is unfinanceable—often not objectively bad projects, just ones that don't fit perfectly into bank profiles.
Anglo-Saxon debt funds have substantial capital but their pricing is too expensive. German banks historically offered much lower margins, and while margins can rise somewhat, they can't reach Anglo-Saxon levels. Theoretically substantial debt capital is available, but realistically German projects can't support these interest rates.
What's promising is the increasing number of German alternative credit providers—insurers like Hanse Merkur, German credit funds providing whole loans or mezzanine. They're offering higher margins than traditional banks but lower than Anglo-Saxons.
My hope is that more German alternative providers with realistic return requirements will revive the transaction market. Still, equity levels will remain higher—70 to 75 percent LTV is the upper limit even with alternative lenders.
Market realism is much higher than a year ago. Those who must sell show flexibility to comply with current levels. We've sold assets at prices we considered too low because sellers needed liquidity and recognized holding out for unrealistic prices serves no purpose.
Sufficient opportunistic capital exists, but creating viable value-add business plans is difficult. We're seeing more core-plus transactions than value-add. I remain optimistic that volumes will gradually increase—without euphoria, but steadily."
Many expected a wave of workout mandates. That hasn't materialised. Has the pain been deferred?
"The workout segment remains limited. Banks wait quite long before taking keys and bringing workout services on board. They try for extended periods to reach compromises and keep borrowers engaged.
Unlike the previous crisis, we're not seeing huge portfolios in distress, just individual troubled financings. In the last boom, many large portfolios were financed—that wasn't the pattern this cycle.
We're seeing some mandates, but much less than last crisis. Much is resolved collaboratively with borrowers. Project investors stay on board more frequently, even when equity is gone. Previously, Anglo-Saxon funds would simply hand back keys and close shop. Now, investors who've lost equity often remain in business and want to survive."
ESG was dominant 18 months ago. Has the industry moved from ideology to pragmatism?
"ESG remains important, but it's no longer criterion number one. Realism has arrived: what's economically viable for each specific building? Much is possible without huge investment— optimize, eliminate waste, measure performance, exchange systems.
Investors won't pursue economically unrealistic ESG measures anymore. There's realism and pragmatism now. Having professional ESG capability remains important. Prisma is our lighthouse project, but the toolbox we've developed applies to other properties.
The unresolved question is what happens to secondary and tertiary office assets—massively undervalued but with no buyers. That's potentially a black swan because long-term they can't be financed or leased in current condition.
German investor capital for new funds remains dry. Active capital comes from family offices, foreign investors, or funds with existing commitments. When will German investors return to indirect real estate?
Despite political uncertainties, foreign investors haven't turned away. Many still believe in Germany's prospects. But with major corporations struggling—Lufthansa, Bosch, automotive, chemicals—and no turnaround yet, this requires monitoring.
One positive: construction costs have declined. Real competition among contractors seeking orders has produced savings versus earlier calculations, though this has natural limits."