The Munich property market faces a challenging situation in 2026. Whilst economic fundamentals continue to show positive trends, rising financing costs, geopolitical uncertainties and structural bottlenecks are increasing the pressure to adapt.
These are the key findings from a press conference on the Munich property market featuring Tobias Seiler, Senior Director of Market Intelligence & Foresight at Colliers in Munich; Fritz Roth, Managing Director at Preaclarus Invest and former Munich City Councillor; Fabian Herrmann, Senior Fund Manager at Catella Investment Management; and Jens Fieber, Managing Director of HIH Projektentwicklung.
Dynamic growth, limited implementation capacity
Munich continues to grow significantly: the population currently stands at around 1.52 million and is expected to increase by approximately 48,700 people over the next five years. Although Munich faces economic and structural challenges, the city remains attractive to businesses thanks to its diverse range of industries and excellent operating conditions.
“The figures show just how strongly Munich continues to grow – and how much pressure there is on the property market. At the same time, many projects are failing due to rising construction costs. Lengthy approval procedures, caused by complex substantive legal requirements, are exacerbating the situation. As a result, supply and demand are drifting further and further apart,” says Fritz Roth, describing the situation.
Fabian Herrmann is well aware that the capital markets are also influencing developments: “Uncertainty in the capital markets and higher financing costs are causing many investors to adopt a cautious approach. Furthermore, pricing has not yet been finalised in many segments, which is further slowing down transaction activity.”
Housing market: Rising rents amid falling construction activity
The Munich housing market remains structurally undersupplied. Whilst demand is rising steadily, construction activity is falling significantly. The number of completed properties remains below the city’s targets, and at the same time, numerous approved housing units have not yet been built.
The trend in rents highlights the pressure: average asking rents have risen steadily in recent years – from around €16.90 per square metre for re-lets in 2018 to around €20.20 in 2025, and up to €23.60 for new-builds. At the same time, purchase price factors for multi-family dwellings have fallen from a peak of around 43 in 2022 to around 27 in 2025.
Fabian Herrmann explains: “We are currently seeing a clear divergence between rental and purchase price trends. Whilst rents are rising, valuations have adjusted significantly. For investors, this means greater discipline when making purchases, but the outlook for returns in the residential sector remains stable.”
“The positive demographic and economic conditions will continue to increase pressure on the housing market. Without a significant expansion of construction activity, the shortage of supply will continue to worsen,” adds Tobias Seiler.
Fritz Roth points to untapped potential: “The high number of flats that have been approved but not built clearly shows that we have an implementation problem. If we speed things up here, we can take some of the pressure off the market.”
Office market: Rising vacancy rates and increasing polarisation
The Munich office market is showing mixed trends in 2026. Take-up stood at around 540,000 square metres last year, whilst some 628,500 square metres of office space is under construction – around 41 per cent of which has already been pre-let. Major tenants are becoming more active again and played a key role in the demand for office space at the start of 2026.
The vacancy rate has risen to around 10 per cent, with significant variations depending on location: in central areas it stands at around 5.1 per cent, whilst in neighbourhoods and the surrounding areas it is over 12 per cent.
“This development highlights the growing polarisation of the market. High-quality space in central locations remains in demand, whilst vacancy rates in outlying areas are rising. This trend will continue to shape the market,” explains Tobias Seiler.
Prime rents continue to rise and now stand at around €61.50 per square metre, and in some cases even significantly higher. Average rents are rising more moderately, at around €26.40.
Jens Fieber sees clear implications for project developers: “The market is changing noticeably. Particularly when it comes to older properties, we need to explore new approaches to make these properties competitive again. Revitalisation, flexible usage concepts and sustainability play a central role in this.”
This is also evident in HIH Projektentwicklung’s current projects: on Paul-Heyse-Straße, an office building with a gross floor area of around 8,400 square metres is undergoing extensive modernisation and expansion, including new facilities such as a café, cycling infrastructure and digital equipment. The project is valued at around 65 million euros.
A mixed-use building covering around 3,650 square metres is being revitalised on Sendlinger Straße. Listed structures will be preserved, whilst modern sustainability standards will be implemented, enabling, amongst other things, a reduction in CO₂ emissions of around 50 per cent.
Fieber emphasises: “Integrated approaches are crucial, particularly for complex projects. It is no longer enough simply to build. We must take a holistic view of property, from development and management right through to marketing.”
Conclusion: A strong market with a growing need for adaptation
The Munich property market remains one of the most attractive locations in Germany, but is facing a period of profound change. Rising demand for residential property, selective demand for office space, limited supply and changing capital market conditions are leading to greater differentiation between property segments and locations.
Jens Fieber sums it up: “The future of the market depends on how effectively we can redevelop existing properties whilst also implementing new projects in a cost-effective manner. Quality, sustainability and adaptability are the key factors for success.”
“To ensure that Munich can continue to grow in the future, we must create the right conditions so that projects can be implemented reliably and swiftly. It is crucial that we also secure procedural simplifications, thereby significantly speeding up processes,” concludes Fritz Roth.
Source: DEAL Magazine