Simon Jeschioro, Cushman & Wakefield Deutschland
Simon Jeschioro is the Head of Capital Markets & Investment Advisory, International Partner, at Cushman & Wakefield in Frankfurt. With over two decades of experience in real estate portfolio transactions, he brings a wealth of insight into market trends. Our thanks to Irmelin Ehrig from Immobilien Projekt im Focus in Berlin for gathering Mr. Jeschioro's views on how the market is likely to unfold in 2025.
Mr. Jeschioro, what is your outlook for the real estate industry at the beginning of 2025?
We’re at a critical point for price adjustments in prime real estate markets, including residential, logistics, and office sectors. But don’t expect prices to bounce back overnight. Instead, we’re likely to see a revival in transaction activity because the demand is definitely there. Additionally, we anticipate prime office rents to continue rising across major cities, while residential rental pressure is only set to grow.
How are foreign investors viewing the German market?
Right now, international investors find the German market highly attractive and largely undervalued. With local investors taking a cautious stance, foreign funds and insurance companies see a golden opportunity to secure their foothold.
What developments do you expect to see in the various asset classes in Germany, particularly in the office property segment?
In the office rental markets of Germany's top five cities, we’re expecting a moderate increase of about 4% to 2.14 million square meters in 2024. But it’s not the same story everywhere. Munich, for instance, leads the pack with an almost 30% jump in sales volume, making it the only city to surpass the 600,000-square-meter threshold. Across the top five markets, we’re seeing a pattern of rising prime rents and vacancy rates. For six years in a row, new office space in these cities has exceeded one million square meters annually, and that trend continues with 1.2 million in 2024 and possibly 1.4 million in 2025.
This suggests that demand for office space seems to be declining overall?
Yes and no. By year-end, vacancy rates are projected to reach about 8.8%. There’s a clear trend among office tenants to downsize while also upgrading to better-quality buildings in premium locations. This dual dynamic is driving high demand at the top end of the market and pushing rents up. Some tenants are also delaying relocation plans—either because they want to cut back on space, new builds remain vacant, or they’re cautious due to the sluggish economy.
How do other European office markets compare?
Over half of the European office markets we analyzed—including London, Brussels, Madrid, and Barcelona—are showing solid demand and steady occupancy rates. Premium quality and prime locations are driving these markets. At the same time, construction activity is tapering off across Europe. Nevertheless, Berlin and Munich continue to rank among the European cities with the highest construction volumes.
How are the industrial and logistics asset classes developing in Germany?
Similar to 2023, logistics and industrial properties are leading the pack, accounting for about 27% of commercial transaction volume, amounting to roughly €6 billion. Office real estate follows with a 23% share. This is largely driven by several big-ticket transactions exceeding €100 million. Notably, nearly 40% of all large-scale deals occurred in the logistics and industrial segment. Portfolio transactions have been particularly significant in this category.
What role did special and retail real estate play?
It was a mixed bag. Retail properties saw a transaction volume of about €4.14 billion, representing an 18% market share, but that’s a drop of almost 6% compared to last year. In contrast, hotel properties performed well with sales of approximately €1.30 billion, up 10% from the previous year. Healthcare real estate was a standout, finishing the year with a 28% increase in volume, significantly outperforming last year. These numbers highlight the varied performance across different property types.
What do these developments mean for new projects and project development?
We can expect a renewed wave of construction activity, driven by ongoing demand, but it won't be evenly spread across all asset classes. However, with tight financing conditions and uncertain sales prospects, the volume of new projects is likely to drop significantly. This is particularly true for the residential sector, where many developments are struggling to make financial sense under current conditions. In this segment, forward transactions could make a comeback, supported by low supply and strong demand.
What opportunities are currently emerging for the investment market?
The German real estate investment market presents attractive opportunities, largely due to the current undervaluation of all asset classes. Looking ahead to 2025, falling financing costs and the potential for rental growth are expected to bolster the market, paving the way for long-term value appreciation. This shift will likely happen gradually.
Wasn't there already an increase in 2024?
Yes, the transaction volume—excluding residential investments—rose by 8% to €22.4 billion in 2024. However, this growth was mainly driven by a few significant transactions, many of which were linked to insolvencies, owner-occupier acquisitions, share deals, or deals involving family offices with substantial equity.
What will the investment market look like in 2025?
Assuming market conditions continue to stabilize, we anticipate a return of yield-driven institutional investors in 2025, intensifying competition among buyers. We also expect reduced market volatility and a gradual decline in prime yields. This sets a positive stage for capital growth, total returns, and strategic investment opportunities.
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