The latest edition of the Baker Tilly Real Estate Trends for the third quarter of 2026 sheds light on the nuanced situation in the German real estate market. Despite a recent slight brightening of economic sentiment, the market is moving sideways. Prime yields and commercial rents remain at their current levels, while residential rents continue to rise due to inflation.
The European Central Bank's interest rate steps are largely priced in, but rising bond yields are keeping pressure on the market. Investors are acting cautiously and observing developments before engaging in significant transaction volumes again. Andreas Röhr, FRICS and Partner in Real Estate Valuation at Baker Tilly, notes that market participants are acting selectively, primarily focusing on properties with reliable cash flows. Large-volume or high-risk transactions therefore remain an exception. Transaction dynamics remain subdued as long as rising interest rates make financing more expensive and the price expectations of buyers and sellers do not converge.
Refinancing Pressure as a Central Challenge
The recent interest rate steps mean that ten-year German government bonds are yielding significantly over three per cent. This leads to established companies also coming under pressure when refinancing. Follow-up financing is now associated with higher debt service and a lower financeable loan volume. At the same time, sectors such as office and retail are under additional price pressure due to higher yield expectations, vacancies, and ESG requirements. If the loan-to-value ratio of a property falls, the possible loan volume is reduced, creating a gap that must be closed by equity. Andreas Röhr comments that the refinancing gap is no longer an abstract market observation but increasingly affects established market participants. Industry estimates put the refinancing gap for 2026 at over EUR 6 billion. However, unlike after the financial crisis, hardly any homogeneous NPL portfolios are forming, according to Baker Tilly Real Estate Trends, as loan structures are more complex and individual solutions are the rule.
Healthcare Properties as a Niche Segment
While even prime office properties are struggling with financing, the market for healthcare properties shows a contrasting trend. International capital is specifically seeking properties with long-term lease agreements and experienced operators. The existing market for care and healthcare properties is already showing liquidity and price discovery again. In the new-build segment, opportunities arise only for specialised players with specific expertise and the necessary patience. Andreas Röhr notes that high construction costs, expensive debt capital, and low sales factors prevent risk and return from aligning in institutional new construction. This curbs new construction activity in this sector.
Looking at the overall market, Andreas Röhr concludes that the current situation is the hour of the active, equity-strong investor. Those who are not influenced by this environment can identify selective opportunities. Quality, location, and the creditworthiness of tenants increasingly determine the performance of individual properties, while the overall market shows stagnant tendencies.
