Newmark has published a comprehensive market analysis on the situation of the German office property investment market. The study concludes that despite selective transaction activities, a broad market bottoming-out is still pending. The analysis, titled “Fundraising & Liquidity – The Spread is the Problem”, focuses on the finding that an insufficient yield spread for investors – defined as the difference between property yields and the yields of government bonds or debt capital interest rates – is blocking the connection between capital, liquidity and transactions.
Without clearer pricing signals and improved risk premiums that could support capital raising, liquidity remains constrained, and reliable benchmarks for investors have yet to establish themselves. At the end of the second quarter of 2026, the yield spread for prime office properties in Germany’s Top 7 markets was approximately 185 basis points, up from 150 basis points in the previous quarter. Historical data suggests that a significant revitalisation of transaction volume only occurs at much higher levels. Newmark therefore predicts a slightly reduced investment volume for the full year 2026 compared to the previous year. A comprehensive upturn is only expected once the spread dynamic improves and capital flows back into the market for core and core+ strategies.
Impact of the Yield Spread on Market Activity
Marcus Lütgering, Country Head Germany at Newmark, notes that the market is waiting for robust yields. He explains that capital remains on the sidelines as long as the risk-return ratio is not compelling for many investors. Activity in the German office investment market remains subdued after a sharp decline in 2022 and 2023. In 2025, the office transaction volume reached EUR 7.3 billion, which was about 60 percent below the five-year average and four percent below the previous year. Although the share of international investors recently increased and the first half of 2026 saw a slight increase of five percent compared to the previous year’s figure, Newmark expects a minor decrease in office investments for the full year 2026.
- —Liquidity is concentrated in a few market segments.
- —Prime assets in top locations are primarily attractive to financially strong private investors and family offices.
- —Institutional core investors are hardly active as buyers.
- —Fundraising has shown recovery tendencies since 2025 but is predominantly driven by opportunistic and value-add strategies.
Helge Zahrnt, Head of Research at Newmark, explains that transactions require liquidity, liquidity arises from fundraising, and fundraising in turn requires a sufficiently high yield spread. This chain of effects is currently interrupted. He observes selective market activities, but a new, broadly supported cycle is still awaited.
Macroeconomic Factors and Outlook
The analysis shows that changes in the risk premium have a delayed but measurable effect. An increase of ten basis points correlates statistically with a gain in office transaction volume of about two percent in the following year. Various factors could cause an expansion of the spread, with rents, sales prices, and financing costs showing different potential and depending on the respective market segment. A yield spread in the region of 275 basis points would have a noticeably positive impact on the market.
The economic environment in Germany is also a drag on the property market. Economic performance declined in 2023 and 2024 and recorded only 0.2 percent growth in 2025. For 2026, only slight, recently revised growth is forecast, supported by fiscal impulses, but it carries high risks such as geopolitical developments and low forecast certainty. The weak economy weighs on rental markets and thus dampens investment decisions. Markets such as London or Paris are further advanced in the cycle, as write-downs were made earlier and more consistently there. Opportunities exist primarily for investors with a clear strategy, low dependence on the capital market, and a focus on liquid asset classes such as residential, logistics, and high-quality office properties in prime locations.
Marcus Lütgering summarises that many investors are observing the market very closely. He emphasises that entry into the next cycle will not be triggered by optimism, but by comprehensible prices, stable cash flows, and sustainable yields. Should market participants not be willing to take the final adjustment steps, no momentum will be generated, and 2026 will remain a year of selective deals rather than a broad market launch.
