Investment Market Overview

Q1 2024

Optimism not yet reflected in results for the investment market

May 08, 2024

The German property investment market got off to a subdued start in 2024, recording a transaction volume of €6.3 billion in the first quarter. This is a very weak result and is a fall of 19 per cent year-on-year; however, JLL expects a significantly higher completion rate for the next three quarters and forecasts a total transaction volume of around €40 billion for the year as a whole. There is still a lack of very large office and portfolio transactions in the core segment in particular. While the year-on-year decline in single-asset transactions is just six per cent, the downturn in portfolio transactions is much more pronounced at 50 per cent, and this is unlikely to change for the time being. This picture is confirmed by the number of deals: the number of single-asset transactions remained stable compared to the first quarter of 2023.

The investment markets are slowly emerging from their state of shock at the beginning of the year; however, this is not yet reflected in the results, as transactions take considerable time to be concluded in the current market climate. By contrast, activity is increasing in the logistics, industry and retail segments. The pricing expectations of sellers and buyers are starting to converge and there is some stability on the part of the banks due to the steady interest rate level, with the markets hoping for a slight reduction. In our view, the decisive factor is that all market participants now have stability and therefore predictability. We firmly believe that the investment volume will recover compared to last year, but the expectations for the year as a whole remain far below the record figures of the past.

Inflation approaching the Central Bank’s target again

The macroeconomic data gives cause for optimism: there was positive news from the Federal Statistical Office just in time for the start of the new quarter. Price growth slowed again in March and inflationary pressure continues to ease, with the inflation rate in Germany falling by 0.3 percentage points to 2.2 per cent. As short to medium-term inflation expectations are also stable at this level, we continue to assume that the European Central Bank (ECB) will start to cut interest rates in June. In conjunction with a stabilisation in financing conditions and property yields, this should encourage a revival in demand in the German investment market.

Nonetheless, in view of the ongoing geopolitical risks and challenges, there will be no return to the past and the recovery is likely to be moderate and tentative. For those hoping for a faster recovery, it is worth glancing in the rear-view mirror at past times of crisis. The property market downturn in the early 1990s lasted around five years and the dot-com crisis in the early 2000s lasted three and a half years. Only during the global financial crisis was the turning point reached in under two years.

In light of these cycles, the expected duration of the current downturn would appear moderate, but the severity of the price decline is unprecedented given the sharp rise in interest rates over a very short space of time, in conjunction with the structural and regulatory challenges. In our view, the property market is at the beginning of a new cycle and we should consider the previous long phase of upswing until the beginning of 2022 as an exception rather than the rule.

€6.3 bn

volume of transactions
in Q1 2024

-19 %

compared to Q1 2023

Restructuring will shape the investment market in 2024

As a consequence of this market turmoil, a special type of property is shifting into focus: the supply of assets in need of restructuring will grow significantly this year. These include properties that no longer meet current user requirements due to their age and structure, and those that are due for refinancing. But this will not be achieved for all assets, especially office properties. We estimate that the cumulative financing gap in this real estate segment could grow to more than €12 billion by 2027 and it is therefore possible that financial and property-specific restructuring could dominate the market in 2024.

This will also attract investors who pursue opportunistic or value-add strategies. Equity-rich portfolio holders will need to step up their asset management activities. The situation for developers remains challenging. Although construction and commodity prices have fallen significantly, they are still at a higher level than before the crisis. This reduces the supply of investment-ready core and new-build properties, and therefore forward deals (i.e. the sale of projects that have not yet been completed to an end investor) will remain the exception in 2024.

Focus on logistics, living and alternative products

Many investors will continue to focus strongly on the logistics and living (residential) real estate segments in 2024. Although the first quarter is typically regarded as only a minor reliable trend indicator, this focus is already evident from the share of more than 40 per cent in the current transaction volume attributable to these two real estate segments. €1.7 billion was invested in logistics and industrial properties in the first quarter of the year, and €900 million in the living segment. Around €820 million of this was attributable to residential property and €80 million to healthcare property.

Office properties remain challenging due to the ongoing structural issues surrounding transformation and remote working, but in view of the price drops to date, some opportunities may be available, especially in the Top 7 markets. In the first quarter, offices accounted for a 19 per cent share, of which 60 per cent was attributable to the top seven real estate strongholds. Nonetheless, the breadth of investments is expected to increase; for example, life science properties with a high proportion of laboratory space and data centres are gaining popularity. Due to the lower volumes, however, they ultimately always function as an admixture in an overall diverse portfolio.

Number of portfolios

Volume each ≥ €100 mn 


Q1 2023


Q1 2024

JLL also anticipates a renewed increase in transaction volumes in the retail segment in which some of the structural problems have been overcome and the exponential growth in eCommerce has not materialised, and where there is a resurgence in demand for a physical presence on the high streets.

Major transaction fuels transaction volume in Munich

At €3.3 billion, the Top 7 real estate markets accounted for 53 per cent, and therefore over half of the nationwide transaction volume. The year-on-year decline of 26 per cent was slightly greater than outside the Top 7 (-10 per cent). However, it is interesting to take a look at the individual markets: Munich stands out, with the Bavarian capital increasing its transaction volume by 56 per cent year-on-year to almost €1.4 billion in the first quarter of 2023. The sale of the 'Fünf Höfe' mixed-use property by Union Investment to a family office for several hundred million Euros was the main contributing factor. It was also the largest transaction of the quarter, in which only six other properties valued above the €100 million mark were sold. Alongside Munich, Hamburg is also worthy of mention, as it was able to match the previous year's transaction result of €430 million.

Yields appear to have stabilised - the low point seems to have been reached

The most important criteria for a revival of the investment market are the stabilisation of purchase prices, a sufficiently high risk premium compared to alternative investments such as bonds, and stable interest rates and financing conditions. We see a cautiously positive trend for all three criteria at the beginning of 2024. Yields on long-term German government bonds have levelled off between 2.2 per cent and 2.4 per cent, while the risk premium compared to the prime office yield is now back at around 220 basis points, its highest level for two years. There has been little change in financing conditions since the final quarter of 2023, which means that a small positive leverage effect can still be achieved.

In our view, yields have bottomed out and only minor fluctuations can be expected. As such, interesting entry opportunities for investors with sufficient equity and no refinancing issues on their balance sheets are likely to arise again in certain segments of the market this year.

JLL currently expects the prime yield for office property to average 4.36 per cent across the Top 7 markets. This figure is seven basis points higher than in the previous quarter. However, in a twelve-month comparison, the increase has narrowed to 83 basis points.

For the first time in two years, the yields in all other real estate segments did not change in the first quarter. This stabilisation is also evident among the financing banks. According to data from the European Banking Authority (EBA), 26 per cent of the banks surveyed intend to increase their financial commitments in the commercial real estate segment; this is the highest level reported since 2021. This improved optimism is also reflected in JLL’s DIFI real estate financing index, which signals a recovery in all real estate segments, with the best outlooks recorded for the logistics and residential segments.

Contact us

Our Capital Markets contacts:

Capital Markets DACH 
Jan Eckert, CEO Switzerland & Head of Capital Markets DACH

Office Investment:
Stephan Leimbach, Head of Office Investment Germany

Industrial Investment:
Diana Schumann, Co-Head of Industrial Investment Germany
Dominic Thoma, Co-Head of Industrial Investment Germany


Residential Investment:
Michael Bender, Head of Residential Germany

Retail Investment:
Sarah Hoffmann, Head of Retail Investment Germany

Helge Scheunemann, Head of Research Germany


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