Neoshare predicts moderate German real estate recovery

Neoshare Real Estate predicts a moderate recovery for the German real estate market in 2025, with commercial transactions expected to reach €30-35 bn.

Residential building permits in Germany - neoshare Real Estate

Capital values are anticipated to stabilise and show modest growth, driven by strong rental increases across all property types.
The recovery is fuelled by a narrowing gap between buyer and seller price expectations and increasing pressure on sellers to offload assets. 
José Martinez, managing director of neoshare, commented: “Our forecasts have identified first positive signals on the real estate market – although it remains crucial to act selectively. Germany offers an attractive outlook as an investment location in 2025, too, especially when it comes to clearly structured projects and sustainable real estate concepts.” 
Office Market: Demand for modern offices in central locations remains strong, while older properties are becoming less marketable. Vacancy rates in Germany's "Big 7" cities are expected to slightly increase to 7.2% by the end of 2025, with prime rents rising by about 2%.
Residential Market: A shortage of new housing, coupled with growing demand, will drive prime rental growth of around 3% in major German cities between 2025 and 2028. This makes the residential segment attractive for investors due to potential above-average returns.
Piotr Bienkowski, managing director of neoshare Real Estate, said: “With yields having stabilised, the residential segment could potentially see above-average total returns because of the persistently strong rental income growth in Germany’s major cities. Accordingly, the focus of both institutional and private investors will remain on the residential market in future. Regarding the affordability, we assume that the trend toward more living space per capita will reverse itself in the major cities.” 
Industrial and Logistics Market: Despite a lack of economic tailwind, rents continue to climb due to declining new construction and near-full occupancy. Prime rents in top logistics regions are projected to increase by 3% annually until 2028.
Retail Real Estate: While the number of physical stores is decreasing, local amenities and retail parks show robust rent growth, especially in food retail. This transformation creates new investment opportunities in well-integrated and sustainable locations.
Alternative Asset Classes: Data centres, life sciences & tech, and hospitality are experiencing dynamic growth. The hospitality market has recovered post-pandemic, with strong demand for budget and sustainable hotels. Cross-border investors are increasingly active in this sector.