German residential real estate investment market Q1 2026: German residential transaction market: 2026 kicks off in a core-driven mode
- Transaction volume in Q1 2026 totals €2.1bn – slightly below the previous year’s level
- Core and Core+ transactions dominate activity – larger value-add portfolios remain the ex-ception
- Despite renewed volatility in financing markets, the fundamental investment environment for residential real estate remains attractive
Frankfurt am Main, 2. April 2026 – In the first quarter of 2026, around 8,400 apartments in multi-family buildings and portfolios were transacted in Germany, representing around one third of the previous first quarter’s volume. At €2.1bn, transaction volume was approximately 12% below Q1 2025. This is the result of Lübke Kelber’s analysis of Germany’s residential transaction market.
The market showed a distinctly core-driven profile at the start of the year. Approximately 75% of total transaction volume was attributable to core and core+ investments – including a relatively high share of forward deals.
“We observed somewhat of a flight-to-safety trend in the residential investment market in the first quarter – particularly driven by institutional investors. At the same time, demand for value-add in-vestments remains high, especially from international capital,” says Mark Holz, Head of Strategy and Research at Lübke Kelber.
Large-scale transactions above €100m were concentrated in the core segment, attracting institu-tional investors such as Quantum, HIH and Columbia Threadneedle, as well as public sector buyers such as Bayernheim. At the same time, forward deal activity picked up, with more than €600m in-vested in project developments.
The share of transaction volume generated in A-cities, markets Lübke Kelber defines as international investment grade, was particularly high at 76%. Investment activity was especially strong in Ham-burg and Berlin, which together accounted for around €1bn in transaction volume.
Several large portfolios that were brought to market at the end of last year—such as 5,500 residential units from DWS and 4,400 residential units from BASF—have not yet been completed. These are two examples from the current pipeline that are indicative of the market’s potential and the increasing transaction momentum over the course of the year.
Strong Market Fundamentals Persist – Interest Rates Remain a Key Risk
The German residential market will continue to be shaped by a pronounced supply-demand imbal-ance in 2026. Vacancy rates remain low across most markets and continue to decline in most loca-tions. Given the limited development pipeline, this imbalance is expected to persist in the medium term, supporting further rental growth.
Rental dynamics may moderate somewhat in major metropolitan areas though, where rent levels are already elevated. In contrast, more affordable yet attractive second- and third-tier cities are likely to experience stronger population growth and more dynamic rental increases.
While rental market fundamentals remain supportive for investors and asset holders, recent devel-opments in bond and financing markets are once again creating headwinds. Following recent geopo-litical tensions, energy prices have risen sharply, followed by an increase in bond yields and financing costs. As at end-March 2026, the German 10-year government bond yield remained above 3%, while swap rates stood at 3.1%, marking a two-year high.
Short-term volatility in interest rate markets is likely to translate into increased uncertainty for real estate transactions. “Nevertheless, we expect investment momentum to increase in 2026 due to the strong fundamentals in the rental market, and demand for residential assets to continue rising,” comments Marc Sahling, CEO of Lübke Kelber, on the market situation.
Methodology
The analysis of transaction volume includes all residential assets comprising at least 20 units and where commercial use is of minor relevance. Minority stakes, pure M&A transactions and entity deals are excluded. Specialised residential segments such as student housing and senior living are also not considered. The classification of A-, B- and C-markets follows the Lübke Kelber definition.
More information is available at: Lübke-Kelber AG