“Further proposals to tighten rent controls come at an inopportune time,” said ZIA President Iris Schöberl, commenting on the key findings of the survey. The assessment of the current business situation rose slightly by 1.7 points to 14.5, although expectations fell more significantly by 3.7 points to 16.4. The overall climate has deteriorated by 1.0 points compared with the fourth quarter of 2025 and now stands almost 10 points below the figure for the summer of 2025.

Whilst the office market remains robust, the residential property sector and property development in particular have been severely affected by the current geopolitical and economic challenges. The property sector is adopting a cautious and reserved stance in its outlook for the coming quarters.

The results for the individual segments:

• Office property: The office segment is the only one in which both the current business situation and future expectations have improved. The assessment of the current situation rose by 3.1 points to 20.0, whilst expectations increased by 6.7 points to 26.7. The property climate stands at 23.3 points (up 4.9). This is due to the continued robustness of the services sector and the trend among many companies to increase the number of days staff spend in the office again.

• Residential property: The business situation rises slightly by 1.1 points to 18.2, but expectations fall sharply from 10.1 to 5.8. The property climate has fallen to 11.9 points, reaching its lowest level since summer 2024. The planned tightening of rent controls and the sharp rise in energy prices following the war in Iran are having a particularly negative impact.
• Project development: The situation is particularly tense. The business climate has fallen by 25.5 points to –23.5, whilst expectations have dropped by 12.3 points to 8.8. Despite rising building permit figures and improved funding conditions, the profitability of many property developers remains limited due to high insolvency rates and insufficient demand. The property climate stands at –8.0 points, the sharpest decline of all segments.

“The results show that unless policymakers take decisive action with structural reforms, the situation on the housing market threatens to worsen dramatically – and this in a context where conditions in metropolitan regions are already extremely strained,” warns Schöberl.

Details on the sentiment index can be found here: ZIA-IW Real Estate Sentiment Index

Background: The survey for the ISI took place from 12 February to 9 March 2026, with the start of the Iran war on 28 February falling within the survey period. Against this backdrop, companies are assessing the future business outlook with scepticism and continuing the trend of increasing caution observed since summer 2025.

The Real Estate Sentiment Index has been compiled by the German Economic Institute (IW) in cooperation with the ZIA since 2020. The aim is to gather up-to-date information on the situation and expectations of property investors and project developers, thereby further improving market transparency. The survey is conducted every quarter.

Source: DEAL Magazine

Operating costs rising disproportionately

The development in the top segment is particularly dramatic: here, operating costs have almost doubled in the last five years. The share of operating costs in total costs increased by approximately six percentage points between 2016 and 2025, reaching a peak of up to 21 per cent.

‘The development of prime rents has become decoupled from the usual market mechanisms,’ explains Alexander Fieback, Head of Office and Commercial Real Estate at bulwiengesa AG. ‘The trend towards “flight to quality, flexibility and location” is leading to new highs in basic rents. The development in operating and maintenance costs is also resulting in a rising “second rent” for everyone.’

Energy prices and wage-price spiral as main drivers

The study identifies three main drivers of cost increases: the sharp rise in energy prices (heating) as a result of the war in Ukraine, the inflation-driven wage-price spiral in labour-intensive facility services, and significantly higher insurance premiums.

The cost structure shows that 48 per cent of operating costs are attributable to facility services, 30 per cent to utilities and waste disposal, and 22 per cent to other costs. Andreas Kühne, Managing Director of the BAUAKADEMIE Group, emphasises: ‘Around 60 per cent of the costs are fixed costs, but 40 per cent can be influenced by intelligent optimisation.’

Certifications are booming – without any cost advantage

Another finding of the study: 66 per cent of office space realised in A cities in 2025 now has building certification. Certifications have become a decisive competitive advantage in attracting tenants, but do not automatically lead to lower operating costs. ‘On the contrary, certified buildings often have higher operating costs – only heating costs are around 20 per cent lower,’ says Kühne.

Optimisation potential can be exploited in concrete terms

The analysis reveals concrete savings potential: 22 per cent of costs can be optimised through joint action by landlords and operators, while 18 per cent can be controlled by users themselves. ‘While some investors are already taking active countermeasures and even achieving cost reductions, others are seeing their operating costs rise above the rate of inflation,’ explains Kühne.

Source: DEAL-Magazin

„The increase in take-up compared to the first half of 2024 is mainly due to some large-volume individual deals and does not reflect the current market reality,’ says Björn Holzwarth, spokesperson for German Property Partners (GPP). “The letting market continues to be dominated by small to medium-sized spaces, with large deals remaining rare. Modern, high-quality space in central locations or with good connections remains the focus of demand, but is in short supply in many places.”

• The development of take-up in the top 7 locations showed a mixed picture: While the figures in Hamburg, Düsseldorf and Stuttgart were largely on a par with the previous year, Frankfurt more than doubled its take-up from the same period last year (+102% to 359,800 m²). The city on the Main thus achieved the highest half-year result among the top 7 cities. This was due to a number of contracts negotiated last year that have now been realised, as well as the large-volume letting by Commerzbank in the 1st quarter. Cologne also increased its take-up by around 83% to around 110,000 m² thanks to a few large-scale agreements. In Berlin, on the other hand, the half-year figure was around 19% down on the previous year, while in Munich it fell by around 10%.

• Vacancies continued to rise in all locations. The increase was most pronounced in Berlin (+42% to 1.75 million m²), Cologne (+33% to 459,000 m²) and Düsseldorf (+30% to 947,100 m²). The top 7 vacancies increased by around 28% to around 8.11 million m², with the top 7 vacancy rate rising accordingly by around 1.8 percentage points to around 8.4%.

• The top 7 owner-occupier rate fell by around 3 percentage points year-on-year to around 8%. While the rate in most locations remained at the previous year’s level or rose slightly, there were virtually no owner-occupiers in Cologne and Düsseldorf.

• In most locations, the sustained demand for modern, high-quality space was reflected in rising average rents. Cologne recorded the largest increase of around 22% to €23.00/m²/month. GPP also registered a significant increase in Frankfurt (+21% to €30.30/m²/month) – and thus the highest average rent of the top 7. In Berlin and Düsseldorf, on the other hand, average rents fell by around 8% and 6% respectively.

• Prime rents in all of the top 7 cities remained largely at the previous year’s level or increased slightly. The most significant increase of around 9% to around €51.00/m²/month was seen in Frankfurt – followed by Stuttgart with an increase of around 6%. The highest prime rent of €54.00/m²/month was realised in Munich.
Holzwarth predicts: “If the announced fiscal policy measures, such as the infrastructure package and tax relief, are implemented, this could be reflected in a gradual economic improvement and a corresponding increase in activity on the letting markets from 2026. For 2025, the reluctance of many users is likely to continue to slow down the take-up of space.

However, the Ifo business climate index, which has risen continuously since January, and some active large-scale searches on the market are sending positive signals for the rest of the year. Against this backdrop, we expect the top 7 take-up of space for 2025 as a whole to be above the previous year’s result, although it will not exceed the long-term average.”

The GPP commercial property network includes Grossmann & Berger Immobilien, Anteon Immobilien, GREIF & CONTZEN Immobilien, blackolive and E & G Immobilien.

Source: DEAL-Magazin

In Munich, UBM Development and ARE Austrian Real Estate want to meet future challenges with the Timber Factory. It is set to be the city’s first timber hybrid campus of this size.

In the coming years, companies will increasingly rely on modular room concepts, movable partition walls and flexible furniture. According to a PwC study, 93 percent of companies are already using flexible workplace models such as flex desks. Companies need less space overall due to working from home, but need to make better use of this space, especially at peak times. The European market for flexible office solutions is growing rapidly: experts forecast an annual growth rate of 10.72% until 2029, which corresponds to an increase from USD 17.93 billion in 2024 to USD 29.83 billion in five years.

Collaboration areas as a catalyst for innovation

Bye bye office, hello AI: modern offices are transforming into vibrant inspiration hubs and are increasingly becoming communication centers. Tenants want more open areas to promote exchange and innovation among employees. Open areas enable spontaneous exchange, flexible meeting zones catalyze creative solution finding, while protected retreats enable concentrated teamwork. A more intelligent use of space is not only sustainable, but has been proven to increase innovative strength. According to a study by the Harvard Business Review, the right physical environment promotes innovation: According to the study, there is a positive correlation between well-designed office space and increased creativity.

Industrial space in transition: merging laboratory, production and office

Another trend: in certain industries, particularly in the life sciences sector, office space is being combined with laboratory and production areas – to promote research and development. According to David S. Christmann, Managing Director of UBM Development Germany, this development is urgently needed.

While office space has undergone major changes in recent years, production and laboratory space is still lagging far behind in terms of workplace quality. Yet there is enormous interest in high-quality space. In the last five years, the sector has seen rental price growth of 39 percent. In addition, developments in the circular economy are driving demand. According to the Boston Consulting Group, the market volume of the circular economy in Germany could grow to 200 billion euros by 2030. “New, modern production and office space is being created here, creating space for sustainable workplaces with specific requirements,” says Gerd Pichler, Head of ARE Development. For this reason, the creators of the Timber Factory are explicitly focusing on laboratory and life science space in their project. Together with ARE Austrian Real Estate, UBM is developing Munich’s first commercial campus in timber-hybrid construction with the Timber Factory.

More than one in ten offices already bears the sustainability seal

Sustainability is more than just an optional feature in 2025: tenants and employees expect environmentally friendly buildings with sustainable materials, energy-efficient systems and biophilic design. Certified office space is in demand: 14% of German office buildings already carry sustainability seals such as DGNB, LEED or BREEAM – and the trend is rising. Another signal: the trend towards “climate quitting”. Younger generations in particular are rejecting jobs in companies without credible climate protection strategies. Sustainable working environments are therefore becoming a decisive factor in employee retention and recruitment.

“The office market is in a state of upheaval. Successful landlords not only offer square meters, but also create working environments that promote productivity, creativity and well-being. The spatial environment is becoming a strategic lever for companies that want to specifically promote innovation, flexibility and team spirit,” says David S. Christmann.

Source: DEAL-Magazin

Our study shows that companies are downsizing their office space, focussing on desk sharing and expanding meeting and social spaces. Large service companies, which use the majority of office space, are particularly active in this regard by investing in modern locations, modernising their office equipment and improving their IT infrastructure. Around a quarter of these companies are downsizing their office space.

However, the survey results indicate that the majority of office downsizing will only take place in the next few years. At the same time, almost half of the large service companies are making their office use more flexible and modernising their facilities, while one fifth are changing at least one office location. Overall, in the main scenario based on our previous study, we assume a structural decline in demand for office space of 12 % by 2030 due to working from home. As a result, the office vacancy rate will continue to rise and the risk of stranded assets in individual office buildings will increase.

These developments in the office property market affect not only companies, employees, owners and investors, but also urban planning. In view of the declining demand for office space, we are analysing the reuse and conversion potential of office buildings. In particular, we are focussing on the conversion of vacant offices into urgently needed residential space. We assume a technical and building law potential of around 30 % for possible conversions, although only a small proportion of this is also economically viable.

Based on the current vacancy rate plus the expected decline in demand due to home offices, the top 7 cities (Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, Düsseldorf) have a medium-term conversion potential of 5.8 million sqm of office space. Taking into account a 20% loss of space and an average flat size of 77 m2 in the top 7 cities, this results in a theoretical potential of around 60,000 flats. With an average household size of 1.7 people, this could create new living space for around 102,000 people. Due to the limited economic viability of many conversions for residential purposes, we also look at alternative uses, partial conversions and neighbourhood development. Our study concludes that creative reutilisation concepts are required for the majority of obsolete office buildings.

Source: Simon Krause, ifoInstitut Andreas Trumpp, Colliers Dr. Tobias Dichtl, Colliers Susanne Kiese, Colliers Alexander Rutsch, Colliers

“However, last year’s result at the start of the year in the top 7 locations was significantly below average in a long-term comparison,” explains Björn Holzwarth, spokesman for German Property Partners (GPP). “This increase should therefore be interpreted as market stabilisation at a lower level than up to 2022.”

• Between January and March, 612,400 m² was taken up in the top 7 locations. However, the market dynamics varied greatly in the individual locations.
• As expected, vacancies continued to rise in all top 7 office letting markets, with the top 7 vacancy rate climbing by 27% year-on-year. The top 7 vacancy rate, on the other hand, remained clearly in single figures at 6.5% after 5.2% a year ago.
• The top 7 owner-occupier rate was 18% after 7% in the same period of the previous year. At 48,000 m², the extension to the Federal Chancellery – the largest volume registered in Q1 2024 – contributed almost half of this figure.

Holzwarth: “The market is becoming increasingly fragmented: Vacancies are concentrated in decentralised locations and outdated existing buildings, while there is hardly any availability in central locations and high-quality space. This can also be seen in the development of rents: Prime rents are trending upwards, while average rents are trending downwards.”

GPP expects market players to be more cautious in 2024 and a similar result to 2023. “If the slightly brighter mood in the German economy recently confirmed in various studies and indices continues, the result could be slightly higher.”

German Property Partners includes Grossmann & Berger Immobilien, Anteon Immobilien, GREIF & CONTZEN Immobilien, blackolive and E & G Real Estate.

Source: DEAL-Magazin

Key findings of the current report “Office property – home office – economic situation”:

• Despite working from home and flexible workplace concepts, the use of office space in Germany increased slightly. The office space used by companies also increased by around 250,000 m² in 2023.
• Home office trend is declining: Compared to 2021, the proportion of those who spent every working day working from home fell more significantly from 10.1 per cent to just 7.4 per cent in 2022.
• Working from home has not led to a slump in demand. Further negative effects from working from home are also unlikely in the future, as companies have already reacted in many cases.
• In the short term, there will be an increase in vacancies on the office markets due to weak demand (especially the decline in GDP) and the still increasing supply (high number of completions)
• In the long term, the development of the office property market will be shaped by economic growth and thus the development of the office workforce. In addition, structural change (tertiarisation) will also have an impact.

Axel Poppinga, Head of the Real Estate Germany division, sees BVT’s investment strategies confirmed on the basis of this analysis by Prof Dr Vornholz. “The issue of working from home no longer plays a major role in our investment decisions. Like Prof Dr Vornholz, BVT also sees that companies have come to terms with the issue and have developed long-term solutions. These are already largely “priced in” to the market and will hardly have any effect on the vacancy rate. More decisive is the economic development in Germany, which has a much greater impact on the vacancy rate. The slowdown in new construction activity and the drop in building permits also play a role, which will have a dampening effect on the vacancy rate. However, as we focus on office properties with long-term leases, a possible vacancy cycle is less relevant for us. Office properties remain an important investment focus for us. Now that buyers and sellers are slowly converging in their price assessments and we assume that the ECB will make its first interest rate cuts in the second half of 2024, we believe that 2024 is a good time to invest in office property.”

Source: DEAL-Magazin

Office property, until recently “everybodys darling”, was declared a problem case in 2023. The market for core properties in particular has almost come to a standstill due to the surprisingly rapid rise in interest rates. There is sufficient equity available for core properties – from both the institutional and private sectors. However, there is usually a lack of willing sellers who are able or willing to give in to the high yield requirements of potential buyers in the current financing landscape. Because the owners know: The best properties in the right locations will experience rising rents in the coming years, and people are reluctant to part with such assets.

High-quality office buildings will become even more valuable in the future – because they will become a scarce commodity as new projects are rarely initiated. Although demand for space is also likely to fall as a result of home offices or a recession, the limited stock of high-quality, ESG-compliant space in prime locations will not be enough to satisfy demand. This is a great opportunity to position oneself accordingly.

Meanwhile, many existing buildings are at risk of becoming stranded assets – unless they are brought up to ESG standards. However, the cost of this is high and the current rental income is generally not sufficient to carry out an ESG repositioning without a major levy given the current borrowing costs. Office rents are therefore likely to rise in future, not only in the prime segment but also across the board. A favourable window of opportunity is therefore currently opening up for investors with strong equity capital to make acquisitions.

However, not all office locations will have a future: Some office properties will have to find a different use in future. This applies in particular to properties on the periphery of major cities, which are already struggling with long-term vacancies. Converting parts of the space to retail, leisure, catering or residential use could take pressure off the market and improve the location. In addition, neighbourhood developments and an upgrading of the locations and thus the properties through improved infrastructure are seen as key. As stakeholders, local authorities also have a duty to adapt development plans and become part of the repositioning process. And last but not least, many investment managers will continue to professionalise and move away from a strict focus on one asset class. In future, they will work and be trained in a more generalised way.

There is a consensus among market participants that the office will remain an important factor despite working from home and will continue to be needed – albeit with a lower workspace ratio and primarily in better locations. The advantages of an office – identity creation, team building, creative, non-linear exchange, protection of data and business secrets – are currently being clearly demonstrated to many companies.

In Germany, the distortions in the office market that are often observed internationally from the user side are only taking place where one would expect them to – in buildings with unattractive spaces and locations that are difficult to reach.

There will be a market revival in 2024. The interest rate level will be incorporated as the “new normal” under the headline “Higher for Longer” and business plans will be adjusted accordingly. Sales factors in excess of 30 times for absolute premium products cannot be calculated in the current interest rate environment. This will dry up the new construction pipeline for the required ESG-compliant prime space and foreseeably lead to a shortage of Grade A space. Collector’s items, which are generally only traded in dynastic periods, are still subject to their own pricing mechanisms.

Those who recognise this development and invest anti-cyclically will enjoy office investments

Source: www.jll.de

Generali Real Estate is the owner and is making part of the premises available to the Generali Foundation “The Human Safety Net”, which supports social and societal transformation and empowers people to create a safe future. The revitalisation therefore not only represents the rescue of a historically significant building, but also has a social impact by providing space. In addition, the renovation, which was completed in 2022, has also upgraded the building’s energy efficiency. From class “E” to “B” with savings of over 50 per cent and a postponement of the “stranding year 2026” determined according to CRREM to 2050.

The two-day WBEF focussed on the topic of ESG from a European perspective. Susanne Eickermann-Riepe FRICS, Chair of the RICS European World Regional Board (EWRB) and member of the RICS World Board (WRB): “European initiatives offer many insights that can accelerate development. This will help us to create a sustainable, resilient continent that will also benefit from its pioneering role in future growth. Venice is a good example of what needs to be done to tackle the effects of climate change. As RICS, we can help with the development of standards.”

Jens Böhnlein MRICS, Chairman of the Board of RICS Germany: “The focus of all endeavours must be on ensuring that an investment continues to gain value in a changing world. The symbiotic relationship between ESG, data and technology will play a crucial role in the transformation of the built environment. Automated transaction processes will make it possible to integrate and operationalise important ESG decision criteria into the investment. Data collection and, above all, the operational use of a building will significantly increase operational efficiency while ensuring optimised usability for the user.”

The RICS emphasises that real estate can form a social infrastructure, be seen as a service offering, and that cities can therefore also be a driving force for social change. Increasingly important issues such as biodiversity and Scope 3 emissions are also forcing the industry to think at the neighbourhood level, beyond the building itself.

“We will see extensive investment in the remodelling and redevelopment of assets. The importance of G in ESG, where everyone in a company must work towards sustainability goals, is increasing and will become a mainstay of corporate strategy,” Eickermann-Riepe and Böhnlein explain in summary, concluding: “In future, property will only be profitable if it sees itself as part of its environment and as a service facility. Doing nothing will cost money. So we are moving away from the old success formula of location, location, location and are on the way to the new premises, which are: location, sustainability and service.”

The RICS will continue the discussion and development of standards at the next WBEF conference in Bilbao on 14/15 October 2024. The WBEF was sponsored by the Platinum Partners Arcadis, the Silver Partners BuildingMinds, Deepki Italia, Cushman & Wakefield and the Bronze Partners workcloud24 as well as the cooperation partner Generali Real Estate.

Source: DEAL-Magazin