Cautious optimism on German residential transaction market

Real estate consultancy NAI apollo reports cautious optimism in the German residential portfolio transaction market for the first half of 2025. 

Germany

While the first quarter benefited from the sale of roughly 8,000 residential and commercial units from the UniImmo: Wohnen ZBI fund, pushing transaction volume to €2.3 bn, no comparable large-scale deals occurred in Q2, resulting in a lower transaction volume of €2.0 bn. Market activity has picked up, particularly for medium-sized and value-add portfolios.
Konrad Kanzler, head of Research at NAI apollo, commented: “The transaction volume of €4.3 bn for the first half of the year exceeded the previous year’s figure by 33%, and was also 30% higher than the result for the same period in 2023. The 64% year-on-year increase in the number of traded units to around 31,300 also reflects the stronger market momentum compared to previous years. However, longer-term comparisons offer a more realistic picture since the result is well below the first-half average for the previous five years of €7.3 bn.” 
The German residential portfolio transaction market saw a significant surge in sales within the €25-50 mln range, making it the second strongest segment in the H1 2025 with a 24% market share, a notable increase from 12.5% in H1 2024. This mid-market segment experienced a transaction volume exceeding €1 bn, a rise of over €620 mln, largely due to demand for core and core-plus properties. Similarly, the €100-500 mln segment led in investment volume, reaching €1.05 bn. Transactions between €50-100 mln also increased significantly, with a 60.5% rise in transaction volume. Conversely, smaller portfolios under €10 mln experienced a 47.3% year-on-year decline in transaction volume.
Open-Ended Funds and Special Funds were the most active participants in the German residential portfolio transaction market during H1 2025, both as buyers and sellers. These funds significantly increased their selling activity, reaching €1.53 bn, largely driven by the sale of large portfolios from the ZBI-Union Investment partnership. Open-Ended Funds and Special Funds also showed a substantial increase in transaction volume, rising from €260 mln in H1 2024 to €980 mln in H1 2025, making them the top buyers. 
Investments in German residential project developments showed a slight increase of 12.7%. Forward deal sales rose by 25.2% year-on-year to €1.1 bn, representing 25.9% of the market share, although below the levels seen in previous years. Demand is particularly strong for new developments incorporating sustainable building standards and a higher proportion of socially subsidized housing.
While German investors continue to lead the market, foreign investor activity increased from €708 mln to nearly €1.8 bn. However, domestic investors remain the dominant force, holding a 58.6% market share with a transaction volume of approximately €2.5 bn, although this represents a notable 19.3 percentage point decrease compared to H1 2024.
The German residential portfolio market is facing a mixed outlook for the remainder of 2025. Increased investor confidence among major institutional players is creating opportunities, but restrictive financing conditions and economic/geopolitical uncertainties remain significant challenges. Positive rental price trends and high demand in many German cities are providing some market support. Government plans to boost construction could stimulate residential property investment in the long term by streamlining approvals, lowering planning costs, and offering targeted subsidies.
Long-term investment strategies, sustainable and social building projects using serial and modular construction, and value-add properties in metropolitan areas are attracting increased attention. Manage-to-green strategies are also becoming popular for existing portfolios. While mega-transactions, such as the potential sale of Adler Group's Berlin portfolio, are being discussed, immediate decisions are unlikely. Consequently, the market is projected to stabilize at around €10 bn for 2025, similar to the previous year, with a more substantial upturn anticipated in 2026.