Residential property in prime German locations continues to be characterised by clear excess demand and offers investors the most robust prospects, while office and retail property shows greater differentiation in terms of location and property quality. This is according to the study ‘Immobilienmarkt Deutschland 2026’ (German Real Estate Market 2026) published by DZ HYP on 4 March 2026, which analyses the development of the commercial real estate markets for the asset classes office, retail and residential in the seven top German locations Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart.
It states: “The outlook for the residential property market remains extremely positive. Demand significantly exceeds supply in the top locations.” This results in favourable rental prospects. In addition, investors continue to perceive residential property as less risky than other segments. Stable demand ensures reliable cash flows and underlines the role of multi-family dwellings as a robust asset class. At the same time, the housing issue is increasingly becoming a source of social stress, as even high-income households are coming under pressure due to high rents in prime locations. Rent dynamics slowed noticeably in 2025, albeit at a very high level.
In 2025, the average initial rent for the seven locations analysed was just over 20 euros per square metre per month, while the average rent for existing flats was just over 15 euros per square metre. The spread between existing rents and new lettings remains so high that moving house is unattractive even when life circumstances change. Given the financial constraints on private households, rents are likely to be more closely linked to income growth in future.
“The property market is facing a structurally changed environment. In future, rental prospects will have an even greater impact on value development. This means that location quality, sustainability and active management will take centre stage. While residential properties continue to offer good prospects, opportunities in the office and retail sectors are emerging primarily where portfolios are being consistently adapted to changing user requirements,” said Sabine Barthauer, CEO of DZ HYP, commenting on the results of the study.
“The study’s findings on rental prospects and risk profiles underscore why investors prefer residential real estate above all else – and should continue to do so. The conditions for this market segment are likely to remain positive in the coming years in prime locations and their surrounding areas, as further migration and rising population figures are expected there,” says Jacopo Mingazzini, CEO of The Grounds.
