Real Estate Monitor

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Thorsten Schnieders
Partner at PwC Germany
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Maximilian Pfeffer
Manager at PwC Germany
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The Real Estate Industry

With more than 20 percent of national income before the automotive and engineering industries, the real estate industry is one of the largest economic sectors in Germany. The dynamic business environment opens up new growth opportunities, but also brings with it new challenges and risks. Market participants must ensure that they anticipate developments in the markets at an early stage. Therefore, their success depends to a large extent on valid market information. PwC’s Real Estate Monitor provides quarterly information on key capital market benchmarks that highlight current trends in the real estate industry.

Real Estate Monitor Q3 2025 (PDF, 0.8 MB)

Real Estate Monitor, Q3 2025

Real Estate Equity Indices: Early Signs of Stabilization Amid Persisting Structural Challenges

• The PwC Real Estate Indices are total return indices tracking the average share price performance of listed German property companies, separately for the residential and commercial sectors. Equally weighted, they offer a broad reflection of investor returns and sentiment in the real estate equity market.
• The latest figures point to an ongoing adjustment in Germany’s listed real estate markets.
• PwC Residential Real Estate Index remains well below its 2021 peak. However, recent months indicate cautious signs of recovery, supported by solid rental fundamentals, continued demand for energy-efficient housing, and a temporarily less dynamic inflation environment. Still, the uptick in inflation to 2.4% in September 2025 underlines the fragility of this recovery amid Germany’s weak economic outlook.
• PwC Commercial Real Estate Index has posted modest gains in 2025. Yet structural challenges persist, particularly in the office segment, where vacancy rates continue to rise and rental growth slows. Investors are increasingly focused on prime assets, while largely avoiding secondary locations. This growing market dispersion highlights the rising importance of asset quality, location, and the potential to accommodate evolving tenant needs.

After a 72% Correction from Peak Levels, Listed Residential Property Holders Have Stabilized – The Stage is Set for a Gradual Recovery

• The sharp repricing in listed residential real estate equities since 2021 reflects a fundamental shift in investor expectations following the end of the ultra-low interest rate environment. 
• Capital market sentiment has adjusted ahead of real economy data, as is often the case in late-cycle corrections.
• PwC Residential Real Estate Index captures this adjustment and now signals early signs of stabilization.
• Investors are gradually regaining confidence, supported by improved visibility on monetary policy, narrowing credit spreads, and firm rental dynamics.
• In 2025, stabilizing interest rate expectations and slowing inflation have supported a cautious rebound in residential equities. 
• In some cases bond spreads have narrowed, providing relief in selected financing markets. Robust rental fundamentals and continued demand for housing provide additional support for investor confidence. 
• Outside institutional markets, the private housing sector has shown tentative signs of recovery. After a sharp contraction in lending volumes during 2022, new mortgage origination has picked up since mid-2023, indicating renewed household appetite for residential investments in structurally attractive regions.

Cautious Outlook for Commercial Real Estate Amid Elevated Financing Costs and Sectoral Imbalances

• The recent repricing in listed commercial property holders reflects an extended correction driven by tighter financial conditions and a shift in investor risk appetite. Since 2022, the sector has come under substantial pressure as refinancing costs increased, credit spreads widened, and long-term interest rates adjusted to a new monetary environment. In many cases, share prices remain significantly below their previous highs.
• While policy rates have begun to stabilise, capital markets continue to demand elevated risk premiums for commercial property issuers, particularly those exposed to structurally challenged segments such as office. Investor sentiment remains cautious. Persistent vacancy, subdued rental growth, and uncertainty surrounding long-term office demand continue to weigh on capital flows. 
• Even prime assets are now required to meet more stringent thresholds for quality, location, and future adaptability.
• A broad-based recovery in listed commercial real estate is unlikely without a sustained easing of refinancing conditions, clearer signs of sectoral rebalancing, and a gradual narrowing of credit spreads. Until these factors materialise, capital allocation will remain highly selective, focusing on resilient asset classes and core urban locations.