As the real estate industry gathers for Expo Real in Munich this October, optimism is cautiously returning to the German property market. The event is expected to draw tens of thousands of participants, and the timing coincides with the first tangible signs that the long downturn in construction and investment may be easing.
The construction sector, which had been under severe pressure, entered the second half of the year on a stronger note. According to the national building association, order volumes rose by 8.7 percent compared to July 2024. Commercial construction has been a key driver of this improvement, while residential buildings are beginning to stabilize after months of stagnation. This shift suggests that demand is slowly rebalancing, offering a foundation for recovery.
Market sentiment indicators also confirm a more positive outlook. The RICS Global Commercial Property Sentiment Index, based on surveys of more than 1,400 firms worldwide, shows that German confidence is edging upward. Early in 2025, only 30 percent of participants believed the property cycle was turning positive. By mid-year, that figure had risen to 40 percent, while nearly half of respondents judged the market to have reached its bottom. Although the overall index remains negative, the improvement in tenant sentiment from minus 21 to minus 11 points to a healthier leasing environment. Importantly, nearly half of respondents now view current prices as reasonable, a sign that buyers and sellers may be converging on realistic valuations, opening the door to renewed transaction activity.
Expo Real itself mirrors this renewed energy. Of the 1,750 exhibitors, 441 are from abroad, with particularly strong participation from the United States. The international mix highlights the continued relevance of Germany as a core market for global investors, even after a difficult period of correction.
A pre event survey of participants, the Trendindex 2025, revealed that 44 percent of respondents expect the German real estate market to improve heading into 2026. The factors most often cited as decisive include monetary policy and the broader political and economic environment, followed by bureaucratic hurdles, the business cycle, and capital availability. Less concern was expressed about non-performing loans or stranded assets, which have so far remained manageable.
In terms of asset classes, investors continue to see residential property as the most resilient segment, with three quarters of participants expecting it to remain central. Care homes and data centers are also gaining importance, reflecting demographic and technological trends. Logistics retains moderate appeal, while office and retail assets remain deeply out of favor, reflecting structural shifts in work and consumption patterns.
Investor groups such as funds, asset managers, and family offices are expected to shape activity in the coming years. Geographically, Europe and the Asia Pacific region are seen as the most attractive growth markets, while interest in the United States has cooled somewhat compared to previous years.
Overall, while challenges remain, the combination of stabilizing construction, improving sentiment, and strong international engagement at Expo Real suggests that the German real estate market may be entering the initial stages of recovery. I will be at Expo Real again next week, from October 6 to 8, as I am every year, covering the news for my audience in Portugal and worldwide. This time my focus will be on commercial and industrial assets, logistics real estate, and the hotel sector, all of which are poised to play a central role in the next chapter of market development.