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It won't come as news to REFIRE readers, naturally, but now it's official - the party is over. That’s the message from Savills’ latest Spotlight report on the German real estate market, which issues a stark warning to owners and investors: don’t count on a repeat of the last “supercycle,” and don’t expect rising values to carry you to safety. Instead, the new era will be defined by sluggish capital growth, sharper performance gaps, and a relentless need for smarter asset management.
“The golden era of zero interest rates not only delivered exceptional returns, it also papered over a multitude of structural flaws,” said Draženko Grahovac, CEO Germany and Head of Valuation Europe at Savills. “Those days are gone. Going forward, rental income will again be the key driver of performance—there will be no free ride from falling interest rates.”
Savills argues that the convergence of returns during the low-rate years is now giving way to a more polarised market, with stark differences emerging between asset classes, locations, and management strategies. For investors accustomed to riding the tide, the shift could be brutal.
“Simply being in the market is no longer enough,” said Karsten Nemecek, Deputy CEO Germany and Head of Capital Markets. “We’re returning to a world in which excess returns go to those with insight and discipline—those who allocate capital selectively, rather than indiscriminately.”
The firm highlights several structural forces accelerating this divergence: the ESG agenda, digitalisation, remote work, the rise of online retail, and now the mainstreaming of AI. Each of these has far-reaching consequences for how space is used—and valued.
“User needs are changing, often faster than owners can react,” said Matthias Pink, Head of Research Germany. “We’re seeing more and more assets become obsolete—not just sub-prime, but decent properties that simply no longer match demand. Meanwhile, best-in-class assets are commanding premiums.”
That bifurcation, according to Savills, is also creating an opportunity—for those willing to make the leap from landlord to service provider. The transformation of real estate from a static product to a dynamic, experience-driven service is already underway, seen in the growth of operator-led mixed-use formats.
“This shift offers fresh revenue potential,” Pink said. “But it requires expertise. Owners can’t just collect rent—they need to understand their users and deliver the right service mix. Real estate is becoming operational, not just physical.”
In short, the new cycle will be harder, more fragmented, and far less forgiving. Expertise, not exposure, will determine outcomes. Or as the report concludes: from due diligence to divestment, investors will need sharper tools and deeper knowledge if they’re to navigate what comes next.