The German real estate market continues its adjustment process, characterised by ongoing valuation corrections and a persistent transaction slump, particularly in the commercial segment. However, the twelfth 5% study by bulwiengesa, supported by ADVANT Beiten, simultaneously shows slightly increased calculated yield potentials in almost all examined asset classes compared to the previous year. This development is significantly influenced by investors' higher yield requirements and increased inflation expectations.
The phase of abrupt revaluations is largely considered complete, although the resulting valuation adjustments are being successively continued. Financing conditions are more predictable again, and the price expectations of buyers and sellers are gradually converging. However, this has not yet led to a broad revival of the transaction market, with market activity in the commercial sector still to be assessed as weak. A return to the conditions of previous low-interest years is no longer expected in the market; instead, a new market environment has established itself, requiring more differentiated and demanding investment decisions.
Quality and Perspective Determine Value
Beyond financing costs, the quality and future viability of a property primarily determine its value today. Energy efficiency, compliance with ESG criteria, rising construction and operating costs, and changing user needs increase the pressure to act, especially for older existing properties. At the same time, modernisations, redevelopments, and repositioning create opportunities for investors who possess the appropriate capital, expertise, and a long-term perspective. The observed slightly increasing internal rates of return (IRR) do not exclusively reflect changes in the real estate markets but also investors' higher yield requirements and increased inflation expectations.
Sven Carstensen, Managing Director of bulwiengesa GmbH, points out that the 'New Normal' continues to be characterised by adjustment processes. He emphasises that valuation corrections are occurring successively, while the transaction slump, particularly for commercial properties, persists. The observed slightly increasing yield potentials should therefore not be equated with a broad market recovery. Florian Baumann, Partner at ADVANT Beiten, adds that yield and risk must be considered together even more closely today, and investment decisions require not only robust economic calculations but also a precise look at legal, regulatory, and property-specific risks.
Segment-Specific Developments and Yields
In the office property sector, a significant change is evident: the base IRR in A-cities rises from 3.91% in 2025 to 4.32% in 2026. In B-cities, it increases to 4.72%, in C-cities to 5.05%, and in D-cities to 5.61%. For the first time, C-cities thus exceed the 5% mark for the base value. Despite higher yield potentials, which also reflect increased risk and return requirements, the market remains selective. Modern, well-let properties in central locations are increasingly moving into investors' focus, while older existing properties without targeted modernisation are coming under increasing pressure. Location, property quality, and alternative use potential are therefore crucial criteria.
Production properties continue to lead the yield ranking in 2026, with a base IRR of 6.17%, which is almost at the previous year's level of 6.14%. Business parks follow with 5.27%, and modern logistics properties also remain largely unchanged at 4.93%. The higher yield potentials in the light industrial segment are accompanied by lower market liquidity and increased demands on asset management. Residential properties confirm their comparatively defensive position with base IRRs of 2.98% in A-cities, 3.13% in B-cities, and 3.38% in university cities for 2026. Housing shortages, low new construction activity, and rising rents support earnings prospects, with changes compared to the previous year being moderate. Hotel properties show base IRRs between 4.84% and 5.21% depending on the category. Shopping centres achieve 4.96%, but their performance strongly depends on property quality, positioning, and potential repositioning measures. The results indicate a further development of a changed market environment, where active asset management is increasingly becoming a success factor.
