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The market may still be in the tunnel, but as Camille Dufieux noted, at lease the light ahead IS now visible
The German real estate market is gearing up for a cautiously optimistic 2025, according to a recent webinar hosted by Berlin-based RUECKERCONSULT, and attended by REFIRE. Featuring industry heavyweights like Michael R. Baumann of Colliers, Jan Philipp Daun of GARBE Industrial Real Estate, and Camille Dufieux of INTREAL, the event provided a deep dive into the opportunities and hurdles facing the sector in the coming year.
As Camille Dufieux aptly summarized: “We see light at the end of the tunnel – but we remain in the tunnel.” Her words capture the mood of an industry emerging from three tumultuous years, with lower inflation and easing interest rates offering glimmers of hope. Yet, a full recovery remains elusive.
The panelists agreed that while transaction volumes are picking up, the highs of the pre-pandemic years are unlikely to return soon. “Investment volumes will return to the levels seen between 2012 and 2016,” said Carsten Demmler of HIH Invest. “If we get back to those levels, we will have a reasonable market in 2025.”
This recalibration marks a shift from the heady days of 2018–2021. The real estate sector is adapting to a more tempered landscape, with asset managers under pressure to deliver on promised returns for investors who remain wary after years of volatility.
Residential and logistics are the clear pace-setters
Residential and logistics properties emerged as clear winners in the panel's analysis. Michael R. Baumann highlighted the resilience of residential assets, driven by demographic trends, immigration, and a lagging supply of high-quality new construction. “Residential will remain attractive for investors in the long term,” he noted.
Logistics, too, continues to shine. Jan Philipp Daun pointed to growth regions outside Germany, such as northern Italy and the Czech Republic, where demand for logistics facilities remains robust. “Germany remains attractive, but it takes much longer to sign a lease here,” Daun said, citing the comparative speed of deals in other markets.
Not surprisingly, office properties presented a more nuanced picture. While core assets in Germany’s top locations still attract interest, the panelists warned that many older or non-ESG-compliant buildings face significant challenges.
“There is a clear ‘flight to quality,’” said Demmler. “The office asset class is far from dead, but anti-cyclical investors are finding attractive entry points under the right conditions.” Baumann echoed this sentiment, noting that international players are showing interest in converting older office stock into ESG-compliant assets.
However, Baumann also cautioned against overestimating the resilience of office markets: “The German top seven office locations are in truth only top three or four at the moment.”
Institutional investors remain hesitant
A consistent theme throughout the discussion was the hesitancy of institutional investors. Many have spent the past two years focused on managing existing portfolios rather than pursuing new acquisitions.
“Family offices, on the other hand, are taking advantage of the market correction,” observed Gerhard Lehner of Savills Investment Management. “They’re investing counter-cyclically in smaller properties, and we’re even seeing larger investments in the three-digit million range from this group.”
Looking ahead, the panelists predicted a rise in the launch of new funds, particularly individual mandates and club deals. “Pool funds and blind pools haven’t worked this year,” Dufieux of INTREAL explained. “Investors are tidying up their portfolios, which is harder when they depend on co-investors.”
Infrastructure is also gaining traction, with private debt funds emerging as a solution to fill refinancing gaps created by tighter bank lending. “We’re heading for a wave of refinancing due to Basel IV requirements,” Dufieux noted, suggesting that private debt could play a pivotal role in bridging these gaps.
ESG - in demand, but cost-sensitive
Sustainability continues to influence investment decisions, though cost remains a barrier. Baumann noted that institutional investors are prioritizing new, highly ESG-compliant stock while overlooking older properties that could benefit from “green transitions.”
Lehner pointed out differences across markets: “In other European countries, super-core office products are still available, but not at the wild prices of 2021. That’s where liquidity is flowing.”
In summary, the panel broadly agreed that the real estate market in 2025 will be marked by selective opportunities rather than broad-based recovery. Investors should watch for:
- Residential and logistics assets: Demographic trends and steady demand make these sectors strong bets.
- Office conversions: ESG-compliant upgrades could offer attractive returns.
- Alternative investment vehicles: Private debt and infrastructure funds are gaining ground as traditional financing tightens.
The market may still be in the tunnel, but as Dufieux noted, at lease the light ahead IS now visible. For investors willing to adapt to the new normal, the coming year offers a chance to recalibrate strategies and position for the longer term.
