pbbIX: Slight upward trend remains intact

• pbbIX rises steadily: The weak recovery in the German office markets continues.
• Sentiment remains characterised by uncertainty.
• Lease transactions remain at below-average levels.
• Prime yields are trending slowly downwards following their peak in 2024 
• Net initial yield in the prime segment has fallen slightly by 5 basis points over the last 12 months.
• Average for the BIG-7 office markets: 4.23%

Munich, 17 March 2026 – The upward trend observed since the second quarter of 2024 remained intact at the end of 2025 . The pbbIX rose in the fourth quarter of 2025 with greater momentum than in recent quarters, reaching a value of -1.74. The year 2025 as a whole was characterised by very modest economic growth. 

Following an uneven course throughout the year, the economy as a whole grew with a slight increase in GDP of +0.2%. Despite cuts in key interest rates since mid-2024, the German economy barely moved forward in 2025 and was unable to have a sustained positive impact on the office property markets.

The latest sentiment surveys in the German economy initially pointed to a continued sideways trend in economic activity. According to the ifo Business Climate Index, the German economy started the new year without momentum and expectations for the overall economy dimmed slightly.

After the inflation rate had remained consistently above 2% throughout 2025, it fell to 1.8% in December. Compared with the previous year, consumer prices rose by 2.2% over the whole of 2025. The expected economic upturn, particularly from the second half of 2026 onwards as a result of economic stimulus programmes, suggests economic growth of around 1.0% for the whole of 2026.

The stagnating economy is also affecting the office space markets of the BIG 7, which are suffering from weak demand. Letting volumes remained virtually unchanged in the fourth quarter at around 650,000 m² compared with the previous quarter (630,000 m²). Across the year as a whole, with the lack of economic momentum, only around 2.7 million m² was let, as in the previous year. The public sector in particular acted as the driver of demand for space, although the share of business-related service providers rose sharply over the course of the year. However, the current take-up figure is still 23% below the 10-year average of 3.5 million m². In the wake of an expected economic recovery, a moderate upturn in lettings activity is anticipated, particularly from the second half of 2026 onwards. 

New construction activity, with a completion volume of 1.1 million m², was around a third lower than in the previous year. Nevertheless, the vacancy rate rose noticeably and stood at a weighted average of 8.1% across all BIG-7 markets at the turn of the year, 130 basis points higher than twelve months earlier. This is also the highest vacancy rate since the fourth quarter of 2013. Across individual markets, vacancy rates range from 5.0% in Cologne to 11.3% in Düsseldorf.     

In line with demand for high-quality space, prime rents continued to trend upwards. In the fourth quarter of 2025, they were almost 6% higher than a year earlier. Due to demand for premium space in prime locations, prime rents remain under upward pressure. 

Capital inflows into the BIG-7 office investment markets were around 3% lower in the fourth quarter of 2025 than in the previous quarter. The downturn in the office investment markets thus continued unabated. In the fourth quarter, office properties worth around €1.5 billion were acquired in the BIG-7 markets. Over the whole of 2025, office investments totalled €4.8 billion, 17% higher than the previous year’s figure. The average for the last ten years, at around €18 billion per annum, remains a long way off, however.   

In Munich, the current quarter, at around 170,000 m², was the strongest since Q3/2022. For 2025 as a whole, however, demand for space fell by 5% year-on-year to around 590,000 m². Compared to the 10-year average, the current annual turnover was actually 16% lower. 

The net initial yield in the prime segment has fallen by 5 basis points over the last 12 months and currently stands at 4.23% on average across the BIG-7 office markets. The yield spread against the current yield on 10-year German government bonds stood at 153 basis points at the end of 2025, having been 204 basis points at the end of 2024.   

At 565,000 m², Frankfurt generated the highest take-up since 2019. This result represents a doubling compared with the previous year and an increase of 16% compared with the 1-year average.

In the fourth quarter of 2025, prime rents were 5.9% higher than a year earlier, with Munich and Frankfurt recording the highest growth rates at 12% and 8% respectively.

The full report for the fourth quarter of 2025 can be found here and, as always, is available to download at pbbIX.de.