German real estate primed for growth in 2026

Colliers' "Outlook 2026" report indicates a year of opportunities for the German real estate market as it enters an early-cycle phase. 

Berlin - Colliers Germany

The German real estate industry is expected to benefit from a slowly recovering economy and initial signs of market stabilisation in 2026. During this period, transactions will be primarily driven by private and international investors, with institutional investors adopting a more selective approach. Prime rents are projected to increase in several sectors, while new construction activity is expected to decline across almost all sectors. Office vacancy rates in the top 7 cities are anticipated to reach a new peak. Growth segments such as residential, industrial & logistics, hotels, and specialised sectors like life sciences and data centres are expected to gain prominence.
Investor sentiment is cautiously optimistic, with private investors and family offices remaining key players, capitalising on price discounts in core and core-plus segments. Institutional investors are expected to be more cautious, while international capital flows, particularly from Anglo-Saxon countries, France, Asia, and the Middle East, are expected to increase. Alternative financing models, such as private debt, are expected to continue to grow. The macroeconomic outlook is based on a forecast of moderate economic growth of around 1.1% for 2026, declining inflation, and a stable employment situation.
Office vacancy rates are expected to peak in 2026, leading to increased competition for ESG-compliant space. Demand is expected to stabilise, particularly from large occupiers, while new construction activity is projected to decline significantly from 2026 onward. The office market is expected to exhibit a clear split, with prime rents in central locations continuing to rise due to strong demand for high-quality, ESG-compliant space. Peripheral locations are expected to see mostly flat rents, widening the rent gap and limiting opportunities for value-add strategies. Initial yields in the top 7 cities are expected to range between 4.25% and 5.00%. Investors are expected to increasingly focus on central locations and ESG-compliant, future-proof properties.
The housing market will remain characterized by a persistent supply shortage, with rents projected to rise by at least 5% in major cities. Despite political measures aimed at addressing the shortage, completions are projected to fall short of demand. Household numbers are expected to continue to grow, further widening the structural housing gap.
The retail sector is expected to remain shaped by consolidation and changing consumer behaviour, with retail parks, grocery stores, and non-food discounters with innovative concepts emerging as winners. City centres are expected to increasingly rely on mixed-use, services, and digital formats. Investors are expected to focus on grocery-anchored concepts and revitalizable shopping centres.  E-commerce and defence will drive demand in the logistics sector, while consolidation in industrial and contract logistics requires differentiated strategies. Strategic locations, complex specialised properties, and flexible existing assets are expected to gain importance.
The hotel market is expected to benefit from rising domestic and international demand and office-to-hotel conversions, with transaction volumes projected at €1.9–2.2 bn. Special segments, such as life sciences and data centres, are expected to develop dynamically, driven by growing demand for lab and research space and high computing and infrastructure needs, respectively.