Key takeaways
- The German real estate investment market closed the first half at roughly EUR 16.6 billion, around 5 percent above the prior-year period — alongside recorded yield increases (CBRE).
- JLL puts volume at roughly EUR 17.6 billion, some 15 percent above last year, and forecasts EUR 35 to 40 billion for the full year (JLL).
- Office property recorded an investment volume of EUR 3.45 billion, up 66 percent on the prior-year period (CBRE Q1 2026).
- In retail, initial yields in central locations in 2024 ranged from 3.7 percent in Munich to 5.7 percent in Essen.
The half-year 2026 figures contain a combination that conventional market logic does not readily explain. The German real estate investment market closed the first half at roughly EUR 16.6 billion, around 5 percent above the prior-year period — alongside recorded yield increases (CBRE). JLL puts volume at roughly EUR 17.6 billion, some 15 percent above last year, and forecasts EUR 35 to 40 billion for the full year (JLL).
Rising volume alongside rising yields contradicts the reflex that more capital inflow must lift prices. That reflex, however, comes from a market phase that has ended.
Why more volume no longer means more price
The link between transaction volume and price level is tight only where the traded assets are homogeneous. That is precisely not the case at present.
A substantial share of half-year volume stems from transactions driven not by return optimisation but by balance sheet clean-up, fund wind-downs, refinancing pressure and the unwinding of redemption backlogs. These sellers are price takers, not price setters. They lift volume without supporting the price floor.
At the same time the buy side has become more disciplined. The market remains highly selective, with investors concentrating on high-quality assets in liquid markets and deciding with discipline. That selectivity is price-stabilising in the prime segment and price-suppressing across the rest — while total volume rises, because the rest has become tradeable again, just at different prices.
The distribution across asset classes confirms this. Office property recorded an investment volume of EUR 3.45 billion, up 66 percent on the prior-year period (CBRE Q1 2026). An increase of that magnitude does not arise from new prices but from new willingness — on both sides — to transact at a clarified price level. Industrial and logistics property also developed dynamically and contributed substantially to the growth.
What changes concretely in valuation practice
Three adjustments follow for valuations that go beyond routine roll-forward.
First, the selection of comparable transactions. Where a substantial share of volume stems from special situations, the unreflective use of transaction databases is methodologically exposed. A time-pressured sale out of a fund wind-down does not represent ordinary business dealing in the sense of the market value definition. Adjusting for special situations matters more now than in normal market phases — and is under-documented in many valuation reports.
Second, the treatment of yield spread. The gap between prime and secondary has widened in several segments to levels not observed for a decade. In retail, initial yields in central locations in 2024 ranged from 3.7 percent in Munich to 5.7 percent in Essen. Applying a yield to a secondary asset derived from the prime figure plus a flat premium systematically understates the spread. The premium today is quality- and liquidity-dependent, not standardisable.
Third, the rental growth assumption. Here the supply side works in the opposite direction: approved building volume in non-residential construction stood at 183.1 million cubic metres in 2025, the lowest level since 2014 (Federal Statistical Office). For prime assets this argues for defensible real rental growth from 2028 — an effect not yet reflected in many cash flow models because it falls outside the typical five-year detailed planning window.
The consequence: valuation returns to case-by-case work
During the compression phase, property valuation was to a large extent a roll-forward business. Market yields fell, values rose, and dispersion between good and poor assets stayed manageable. That phase is over.
The practical result is materially higher effort per asset — and a higher value on asset-level knowledge. Factors that barely mattered to valuations between 2014 and 2021 now decide double-digit percentage differences: genuine alternative-use capability, the remaining useful life of building services, the capex required to reach regulatory minimum standards, the covenant strength and operational stability of the anchor tenant, and the divisibility of the lettable area.
For investors this carries an uncomfortable implication: external valuations are less reliable in this market phase than usual — not because valuers work less well, but because the data foundation for comparable derivation is thinner and more heterogeneous. Asset-level due diligence increasingly replaces what the market previously delivered through comparable pricing.
One caveat belongs here: should the recovery broaden in 2027 and the buyer pool grow beyond the prime segment, the spread may converge faster than expected. Anyone valuing secondary assets today at maximum risk premium may find they missed the entry point into exactly the segment carrying the strongest recovery dynamic.
Three methodological error sources in the current environment
One methodological point deserves particular attention: the treatment of incentives. In an occupier market, deals are routinely bought with rent-free periods, fit-out contributions and relocation cost sharing. The gap between headline and effective rent has reached double-digit percentages of headline rent in several German office markets. Where valuations capitalise headline rent without deducting the present value of incentives, a systematic upward error arises that is material over long lease terms. When deriving comparable rents from market reports it is therefore critical to know whether the reported prime rent is stated on a headline or effective basis — conventions differ between houses.
The second point concerns the capitalisation base. In an environment where a relevant share of standing stock requires substantial regulatorily driven capex within five years, capitalising a stabilised cash flow without an explicit capex deduction is misleading. Sound methodology separates ongoing maintenance from one-off upgrade investment and reflects the latter as a present value deduction. In practice that separation is frequently omitted because upgrade costs are hard to quantify — which is no argument for setting them at zero.
The third point is valuation frequency. Institutional holders value quarterly or semi-annually. In a phase of high dispersion and a thin comparable base, this produces a smoothing that distorts the actual value path: book values move in small steps while the market prices in jumps. For holders with disposal intent, the decisive figure is therefore not the book value but an honest assessment of the price achievable today given a realistic bidder count. The gap between the two is currently material in secondary segments and should be stated explicitly internally, before it becomes visible in a sale process.
What this means for principals: rising volume alongside rising yields signals a market absorbing special situations, not one being repriced. For valuations this means adjusting comparables rigorously for forced sales, deriving risk premiums asset-by-asset rather than as a flat add-on, and explicitly incorporating the thin post-2028 development pipeline into rental growth assumptions. And it means the value of external valuation reports is limited in this phase — the decisive work happens at asset level.
AI-generated, editor-reviewed. Briefings are drafted by neospaces research models from current broker market data and reviewed by a broker before publication.