Investment Market Overview

Q1 2022
May 03, 2022

The quarterly investment market overview analyses latest developments on the investment market for German commercial property. The publication describes the key market trends and analyses essential market parameters such as transaction volumes and yield performance from different perspectives.

The German investment market remains unaffected by the war in Ukraine

With a transaction volume of €24 billion, 2022 was off to a very dynamic start

The world is currently being shaken by several concurrent crises; however, this has not yet been reflected in Germany’s real estate market during the first quarter of 2022. The market at the beginning of the year was off to a buoyant start, but it is likely that any impact from these events will become apparent in the medium term. The restrictions imposed during the Coronavirus pandemic seem to be easing, however, it is still entirely uncertain how long the war in Ukraine is likely to last and what the full extent will be. In such times of crisis, both private and institutional investors focus on safe havens to avoid any high-risk investments. It is therefore necessary to continuously monitor the market and thoroughly examine all possible scenarios. Although it can be assumed that this year will be shaped by challenging situations, and despite all of the scepticism surrounding the current state of affairs, there are also possible upsides. As a result of the pandemic in the past two years, society and industry have learned to cope better with unpredictability and managed to proceed with caution, and the markets have also adapted. It is now possible that post-pandemic catch-up effects may help to mitigate the economic effects of the war in Ukraine.

Real estate assets tend to hold their value in times of crisis yet the mood in the real estate industry has deteriorated significantly recently. In addition to rising energy and construction costs, the fear of increased interest rates is spreading. However, any rise in interest rates by the ECB only poses a risk to the market if significant and sudden. Despite even higher levels of inflation than in the Eurozone, the US Federal Reserve is proceeding cautiously with only small incremental interest rate rises. We expect the ECB to act in a similar fashion with the imposition of predictable rate hikes.

The middle ground is somewhere between a negative (e.g. stopping the import of Russian gas) and a more positive outcome (e.g. a quick end to the war in Ukraine) and assumes a moderate economic decline as well as a temporary steep rise in inflation rates. To be classified as such, the following basic essentials must be in place:

  • The war only lasts a few months and the conflict does not spread into other states or regions;
  • No further economic sanctions are imposed on Russia or even China;
  • Any disruptions or failures within the supply chain as a result of the conflict will persist for no longer than a year.

Should this scenario present itself, the ECB can be expected to instigate its first moderate rate hike by the end of the year as it is always important for the Central Bank to balance monetary support for economic activities with tackling inflation. The turning point concept may hold true with respect to geopolitics. However, in the financial and real estate markets, a cyclical change in the ending of negative interest rates was already anticipated before 24th February 2022.

The volume of transactions surpasses the 2021 quarterly result by a large margin

The momentum in the German investment market from the previous year continued into the first quarter of 2022, despite external influences.

€24 bn 

volume of transactions in Q1 2022


increase in volume of transactions in Q1 2022 versus Q1 2021

The volume of transactions in those first three months amounted to around €24 billion and is thereby 43 per cent higher than the comparative value from 2021. Most of the transactions were carried out prior to the war in Ukraine, but Germany is still seen as a stable and attractive destination for national and international real estate investors. The litmus test will undoubtedly follow in the coming weeks and months, though at present we do not foresee any significant effects such as the cancellation of sales contracts before completion or a complete halt to investment plans.

Currently, as the demand for investment capital remains high, even with rising government bond yields, the demand for the best real estate products should remain strong. Real estate is doing well because there is a clear and transparent pricing structure, while other forms of investment demonstrate significantly higher volatility. That is why institutional investors continue to buy consistently, and considering current events, it is important for them to remain invested.


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At the same time, the market situation requires more caution. All market data is updated daily and predictions over multiple days, or even weeks, are rarely possible. At the same time, the unusually high inflation means that investors can no longer be guided by nominal interest rates but must base their decisions on real interest rates. This calls for a complete rethink for many players in the industry. From the current perspective, we can expect exciting transaction activity as the year progresses. On the one hand, real estate is still financially feasible despite higher costs. However, buyers with strong equity capital have a big advantage in this kind of environment and there may also be an increase in supply. This is due to owners interpreting the current point in the cycle as a signal to sell. Also, given the continuously increasing prices and values, some institutional investors such as insurance companies could reach their specified portfolio allocation limits, such that they could be forced into selling assets.

There will be no lack of available products as many investors are now able to easily liquidate their assets. In deciding to sell, the crucial question, however, lies in where the proceeds can be directly reinvested. Right now, the biggest mistake that can be made is to not invest and leave too many liquid assets idle.

In the short and medium term, investing with a sense of proportion is what is called for. This does not only apply to the careful inspection of the properties and their tenants, but also to drafting contracts, examining other sources of funding (loan funds) and checking sustainability compliance. In light of the current situation, we are seeing a clear shift towards Core properties in good locations. The industry has already been shaped by the ESG debate, but the war in Ukraine has brought the issue of energy security into increased focus. For ESG, it is no longer a question of if, but when.

The Alstria deal and the Marienturm sale caused quite a stir in the first quarter of 2022

A number of significant transactions defined the first quarter of 2022. Brookfield assumed 90 per cent of the Alstria REIT and the properties that came with it. JLL estimates the proportionate value of the 122 office properties to be around €4.5 billion. Another highlight was the sale of the Marienturm in Frankfurt. This deal particularly demonstrates that such large-scale transactions are still possible, even in difficult market conditions when the future of office work debate is ongoing.

In total, the volume of single-asset deals across Germany amounted to €12 billion, exceeding the previous year’s volume by 19 per cent. Within portfolio sales the momentum continues to be remarkable. The €11.8 billion currently in transaction represents an increase of 79 per cent, largely driven by the two large company sales. A total of 25 portfolios, each one containing a transaction volume of over €100 million, changed hands in the first few months of this year, compared to the same timeframe in 2021, when just 14 transactions occurred.

Total sales of portfolios

Volume of transactions each >€100 mn 


Q1 2021


Q1 2022

Hamburg and Düsseldorf were among the big winners at the beginning of the year

At €12 billion, approximately half of the transaction volume can be attributed to Germany’s Big 7 cities, with the transaction volume rising by 72 per cent year-on-year. With a turnover of €3 billion, Berlin still comes out on top, above Frankfurt with €2.6 billion and Hamburg with €2.4 billion. The Hanseatic city profited especially from the fact that numerous properties in the Alstria portfolio are located in Hamburg. The volume invested in Düsseldorf (up 189 per cent to nearly €1.4 billion) rose even more sharply than in Hamburg (up 126%), albeit from a very low level the year before.

Outside the Big 7, a total of approximately €11.8 billion was invested, 20 per cent more than in the previous year. The biggest transactions were the sale of a portfolio of apartment buildings in Regensburg for €170 million and a distribution centre in Hamm for more than €100 million.

The office as an investment product is back: mixed-/multi-use and highly dynamic logistics

In the first quarter, around €10.9 billion was invested in German office real estate. That is almost 46 per cent of the quarterly result or an increase of 172 per cent compared with the first quarter of the previous year, and illustrates that investors still believe in the value of this asset class. Despite the higher financing costs and more complicated environment, the letting situation in relation to rising rent prices is still good and is the driving force for national and international investors. Demand will continue to focus on quality products, and sustainability now plays an increasingly important role as far as energy consumption and tenant occupancy are concerned. What is more, there is now also a bigger emphasis on the S in ESG. The social component in office buildings manifests itself through the sense of well-being, as well as through interaction with the surrounding neighbourhood. That is exactly why mixed-use properties with an office component are becoming increasingly more important. In the first quarter, such properties were able to achieve a transaction volume of more than €2 billion: an increase of 206 per cent compared to the previous year.

Coming in at around €4.5 billion, the Living Sector accounted for approximately 19 per cent of the quarter’s transaction volume. This figure is unusually low considering the record highs of recent years and equates to a 40 per cent decline over the 12-month period. The reason for this lies simply in the fact that there have not been any recent corporate takeovers or mergers to cause the exorbitant volumes of the past year. In this respect, 2022 is once again a ‘normal year’ and JLL predicts that the transaction activity over the course of the year and which will primarily be fuelled by small and medium-sized portfolios, will remain lively.

Despite the continuously rising prices, the transaction volume of logistic and industrial real estate has doubled year-on-year to €3.9 billion. The seven largest transactions of the quarter were all portfolios containing distribution properties and they contributed more than half of the total volume with a sum of €2.1 billion. In light of the ongoing and escalating discussions surrounding reshoring, nearshoring or deglobalisation, JLL also expects a higher demand for production sheds for industrial manufacturing in the medium term. However, this will be accompanied by significantly higher labour and operating costs for companies which could limit rental growth potential. However, the supply of such properties is still restricted, which will raise prices, should demand increase. For 2022 as a whole, a total transaction volume of €10 to €11 billion is anticipated, which would once again slightly surpass the record of the preceding year.

In the retail sector, the trend of slow market recovery that began at the end of last year has been maintained. The long period of Covid restrictions seems to be over and life is slowly returning to inner-city shopping areas. On the whole, around €1.9 billion was channelled into retail properties in the first quarter, corresponding to an 8 per cent share of the total volume. As ever, the majority of transactions take place within the small and medium-size categories, i.e. predominantly neighbourhood shopping centres and retail warehouses. The major sale of Galerie Lafayette in Berlin to Tishman Speyer for over €300 million stood out. JLL is currently assuming a total transaction volume of at least €8.5 billion for 2022. The decisive factor will depend on how consumers act in the area of tension caused by an absence due to high inflation on the one hand, and a consumption catch-up effect on the other.

Prime yields: logistic products and retail properties are virtually neck and neck

A glance at the prime yields at the end of the first quarter across all asset classes shows only minimal changes. The interest rate shift, which is already reflected in rising government bond yields and in higher financing costs, has not yet affected the real estate market, nor has it been priced in. It is being overshadowed by other trends and developments. Knowing the extent of the economic decline over the further course of the year in conjunction with high construction costs will have a big impact on price development and performance growth in all sectors. Though, as long as costs can be transferred to tenants through indexation clauses, yields will also remain low.

In the logistics sector, the average prime yield across the regions fell by a further 7 basis points. It breached the 3 per cent mark and now lies at 2.96 per cent. Logistic properties now cost almost as much as high-street retail properties, whose yield remains unchanged at 2.91 per cent. The boom in demand for warehouse space continues uninhibited. Due to the disrupted global supply chains, JLL assumes that the move towards deglobalisation and nearshoring will intensify in some production areas, and this would further increase the demand for suitable storage space.

Office real estate is slightly more expensive. Here, the initial yield for top products in the best locations is at 2.62 per cent on average across all Big 7 cities. The consumer’s focus on quality and increasing rent prices is making every sqm of office space more expensive. Also, despite the recent significant increase in the new construction pipeline, this emphasis on quality adds more pressure to improve premium products. With this in mind, we expect a reduction of a further 10 basis points by the end of the year.

In retail we are not expecting any changes in yields at this time or over the course of the year. The focus of investors remains on food-anchored supermarkets, discount stores or retail warehouses. Ultimately, however, even a stable initial yield with rising financing costs represents a further indirect increase in the costs of owning property, since the return on equity for investors is falling. According to JLL, financing is key. In terms of the office, logistic and residential asset classes, financing can still be obtained through traditional financing channels, but banks are struggling internally with increased requirements for each product. Sustainability is of primary consideration, but macro and micro-location, alternative use potential and tenant creditworthiness have also come into much greater focus. Similarly, the constantly increasing regulatory requirements are also evident. Any gaps that may arise from this are covered in the Core / Core Plus segment by investors' increased equity ratios, since institutional investors in particular continue to have sufficient resources. In the other risk classes, such as Value-add, Opportunistic and Developments, they are increasingly resorting to alternative financing options. In addition to loan funds, these are primarily insurance companies and investment banks at present.  

Contact us

Our Capital Markets contacts:

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

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

Office Investment:
Marcus Lütgering, Head of Office 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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