German residential transactions down 12% in Q1 2026

The German residential investment market began 2026 with a transaction volume of €2.1bn, according to data from Lübke Kelber.

Germany - Lübke Kelber

While this represents a 12% decline compared to the first quarter of 2025, the market saw roughly 8,400 units change hands—about one-third of the previous Q1's transaction count.

The start of the year was defined by a flight to quality. Approximately 75% of all activity was concentrated in the core and core+ segments. Institutional players such as Quantum, HIH, and Columbia Threadneedle, along with public sector entities like Bayernheim, drove large-scale deals exceeding €100 mln.

Major hubs (A-cities) accounted for 76% of total volume. Berlin and Hamburg were the primary drivers, together generating roughly €1bn in deals.

There was a notable uptick in project development investments, which totalled over €600 mln.

Significant portfolios from the end of 2025—including thousands of units from DWS and BASF—remain in progress, suggesting momentum will build throughout the year.

The structural outlook for German residential real estate remains robust, though financial volatility persists.

The market continues to face a significant supply-demand imbalance. With vacancy rates falling and new construction pipelines remaining limited, rental growth is expected to continue. While rent increases may stabilise in expensive metropolitan areas, Lübke Kelber anticipates more dynamic growth in affordable, secondary, and tertiary cities.

Despite strong property fundamentals, the sector faces renewed pressure from the financing markets.

Geopolitical tensions and high energy prices have pushed the 10-year German government bond yield above 3%.

Swap rates reached a two-year high of 3.1% at the end of March 2026.

These fluctuations in interest rates are introducing fresh uncertainty, likely impacting transaction speed and investor confidence in the short term.

Mark Holz, head of Strategy and Research at Lübke Kelber, commented: “We observed somewhat of a flight-to-safety trend in the residential investment market in the first quarter – particularly driven by institutional investors. At the same time, demand for value-add investments remains high, especially from international capital.”

Marc Sahling, CEO of Lübke Kelber, added: “We expect investment momentum to increase in 2026 due to the strong fundamentals in the rental market, and demand for residential assets to continue rising.”

The transaction volume analysis incorporates all residential properties with a minimum of 20 units, provided that commercial usage remains a secondary factor. Minority stakes, pure M&A transactions and entity deals are excluded, while PBSA and senior living are not considered.