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Germany’s real estate market is inching into a tentative second-half 2025 recovery, if the latest assessments by Real Blue and neoshare Real Estate are to be believed. But forget any hopes of a roaring comeback—this is a market defined by asset-specific resilience, a focus on ESG compliance, and a few bright spots amid a muted investment backdrop.
Just for background: Real Blue Kapitalverwaltungs-GmbH, part of the Drees & Sommer Group, is an investment manager with a pronounced focus on institutional real estate strategies. Their recent survey of 58 institutional investors—ranging from insurance funds to pension schemes—offers a glimpse of where the smart money sees flickers of opportunity.
Neoshare Real Estate, meanwhile, is a consultancy rooted in transaction, debt & structured finance, and valuation services across Germany, where it is a recent arrival, but having stocked its upper management with veterans of the German real estate scene. Its house view leans on data-driven insights into capital flows, segment-specific risks, and the shifting sands of institutional appetite.
Cautious Revival: Investors Cherry-Pick Bright Spots
Real Blue’s survey signals a broad consensus: residential remains the standout for 77% of those polled, with one investor summing it up crisply: “Demand for residential properties remains unbroken, logistics properties are benefiting from stable user structures—and many investors see selective opportunities in the office sector,” according to Michael Eisenmann, Managing Director of Real Blue.
Data centres are also catching fire with investors—69% expect price growth here, with 74% of respondents seeing them as a viable institutional product. Eisenmann observes: “The interest in data centres reflects the structural changes in our economy. Institutional investors are increasingly focusing on resilient, technology-driven real estate strategies.”
Neoshare’s analysis tempers this cautious optimism with hard-nosed realism. “Our forecasts have identified first positive signals on the real estate market—although it remains crucial to act selectively,” said José Martinez, Managing Director of neoshare. For 2025, they see commercial transaction volumes of €30–35 billion, a modest bump from last year’s lows.
Rents Rising, But Risks Linger
The neoshare report hones in on rental growth as the decisive lever in a subdued market. Piotr Bienkowski, also Managing Director at neoshare, emphasises this: “With yields having stabilised, the residential segment could potentially see above-average total returns because of the persistently strong rental income growth in Germany’s major cities.” Residential rents in the Big 7 cities are projected to grow by 3% annually through 2028—a steady foundation in an environment still wrestling with refinancing hurdles.
Yet the commercial landscape remains a minefield. Vacancy rates in the Big 7’s office sector are forecast to rise to 7.2% by year-end, driven by growing obsolescence in older stock. Andreas Trumpp, Co-Head of Market Intelligence & Foresight at neoshare, captures the shifting mood: “Businesses are increasingly prioritising high quality, sustainability and flexible layout concepts—and investors are well advised to respond accordingly now.”
In logistics and light industrial, new-build completions have fallen sharply since their 2022 peak, leading to a stagnating vacancy rate below 5%—a sign of tight supply and near-full occupancy, even absent broader economic tailwinds. Neoshare sees prime logistics rents continuing to rise at an annual rate of 3% through 2028.
Retail is likewise a tale of divergence. While footfall-driven high street assets remain in the doldrums (only 3% of Real Blue’s respondents are buying), neoshare points to retail parks and local amenities as emerging pockets of stability. “Their rent rates show robust growth, mainly because of indexed long-term leases,” the analysis notes.
The Implications: A Discerning Thaw
For investors, the takeaway is clear: the era of blanket investment theses is over. Sector- and location-specific diligence is paramount. Data centres, logistics, and high-quality residential remain the prime targets, while office and retail require a far more granular approach.
Meanwhile, with 52% of Real Blue’s respondents planning sales to streamline portfolios, a wave of disposals is brewing—suggesting more price adjustments to come in the coming quarters.
As Eisenmann summarises: “The decisive factors are the quality of the locations and the ESG suitability of the properties.” Or as Martinez at neoshare cautions: “The German market offers an attractive outlook in 2025, but only for those prepared to be highly selective.”
The implication for foreign capital? Germany’s real estate market is stirring from its slumber, but investors would do well to tread carefully. Over the coming months, expect more price adjustments and portfolio reshuffles. The selective momentum seen in logistics, residential, and data centres will remain, while weaker assets and fringe locations may continue to struggle for traction.